President Biden has been campaigning across Pennsylvania, telling workers he is on their side, fighting for working families by raising taxes on big corporations. Senator Bernie Sanders also says he is fighting for working people, introducing new legislation to raise the corporate rate back to the highest rate in the world.
Unfortunately, both of them are wrong about the corporate tax rate. An overwhelming body of economic research shows that raising the corporate tax rate as they are proposing would actually hurt not help working people. Numerous studies show the harmful effects a higher rate has on everyday American families, lowering their income, raising the prices they pay, and reducing their retirement savings.
The experience after the 2017 tax cuts shows that working people benefited from a lower tax rate. In the two years after enactment, the unemployment rate dropped to 3.5%, the lowest rate in fifty years, and three percentage points lower than the average rate the previous fifteen years.
Wages increased, with real wage growth doubling. A Business Roundtable survey found that seven million workers at leading U.S. firms moved up into jobs with middle class wages between 2018 and 2022.
It is a mystery why so many Democratic politicians want to raise the tax rate on companies that employ so many of their supporters. Study after study shows that as much as 70% of the burden of a higher corporate tax rate falls on working people. A Federal Reserve Board study found that a corporate tax rate hike would be “uniformly harmful” to workers, leading to “significant reductions” in jobs and income.
Another study has shown that a higher corporate tax rate would lead to higher consumer prices. An NBER study found that a rate hike would have a “significant effect” on prices, with nearly one-third of the tax increase falling on consumers in the form of higher prices.
In addition to facing lower wages and higher prices, working families would face higher taxes from a corporate tax increase, primarily from higher taxes on their pensions and retirement savings. A Joint Committee on Taxation study shows that 172 million individual taxpayers would be hit by a higher corporate rate. More than 125 million of them have income below $100,000 a year.
A Treasury Department study estimates that more than one-third of the higher taxes from a 28% corporate rate—-nearly $500 billion—-would fall on taxpayers earning less than $310,680 a year. The Treasury study also shows that 92.6 million families would pay more in corporate taxes than they do in individual income taxes.
Economic experts agree that increasing the corporate tax rate is the most economically harmful tax increase. It hurts investment, growth, and productivity. It also hurts workers, consumers, and savers. It makes no sense for Democrats to keep pushing a higher corporate tax rate.
Democrats Should Stop Pushing a Higher Corporate Tax Rate
April 27, 2024
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