Wednesday, May 26, 2021
Since taking office, the Biden Administration has passed a $1.9 trillion stimulus bill to fuel an economy that was already expanding at a very healthy pace. Now President Biden is advancing a so-called $2.0 trillion “infrastructure” bill. To pay for a portion of this exploding spending, the president has called for an increase in the corporate income tax rate from 21% to 28%, and a boost in the income tax rate on households making more than $400,000. The added corporate tax rate is on top of state the assessment of 44 states and D.C. that have corporate income taxes on the books ranging from North Carolina’s single rate of 2.5% to a top marginal rate of 11.5% in New Jersey. An increase in the federal corporate tax rate to 28 percent would raise the U.S. federal-state combined tax rate to an average of almost 34% and would be the highest among the 37 OECD nations which have an average corporate rate of 22% with lowest rates for Ireland at 12.5%, and Switzerland at 8.5%. This increase would harm U.S. economic competitiveness and increase the cost of U.S. firms. The Tax Foundation estimated that the hike would reduce long-run GDP growth by approximately one-fourth, eliminate 159,000 jobs, and reduce wages by 0.7%. But instead of engaging in global competition, the Biden Administration is attempting to coerce OECD members into raising their rates. To quote ex-academic economist, Federal Reserve Chairman, and current U.S. Treasury Secretary Janet Yellen, “Destructive tax competition will only end when enough major economies stop undercutting one another and agree to a global minimum tax.” I guess she only believed in market-based economics and competition when she was teaching macroeconomics at the University of California-Berkley. Welcome to the 21st Century Dr. Yellen. The U.S. must compete in the global economy, not attempt to fix prices, and limit competition. This is not legal for companies in the U.S., and should be verboten for OECD nations.