During the Reagan administration, President Reagan cut tax rates across the board, reducing the top individual tax rate from 70% to 28% and cutting the corporate tax rate. The economy boomed, growing at an annual average rate of 5% until 1990, when President Bush agreed to raise the top rate to nearly 40%. The economy quickly slumped, and President Bush lost his reelection bid.
Now, some Republicans are talking about raising tax rates again, wishfully thinking that they can raise additional revenue to avoid larger spending cuts and blunt Democrats criticism. This is not a good idea.
A large body of economic research shows that trying to reduce budget deficits with tax increases has never worked. These studies show that higher individual and corporate tax rates depress economic growth and result in higher not lower budget deficits.
Increasing the individual tax rate on the most productive investors and small businesses and raising the corporate tax rate would do more economic harm than any other revenue offset or spending cut. Raising these rates, as the Biden-Harris administration proposed every year for four years in a row, would reduce investment, productivity, and wages, harming working families and reducing U.S. global competitiveness.
Numerous studies show that working people bear the brunt of a higher corporate tax rate. A corporate tax rate increase would lead to lower wages, higher consumer prices, and lower retirement savings for working families.
Even a small corporate rate increase would have negative economic effects. A 25% rate would be a combined federal-state rate of nearly 30%, a rate nearly twice as high as the 15% rate China levies on its most important economic sectors.
Finally, Congress should be wary of any CBO forecast that higher individual or corporate tax rates would raise hundreds of billions of dollars. The record shows that CBO revenue forecasts are consistently inaccurate, ignoring the real world negative impact of higher rates on investment incentives and economic growth.
With the markets reeling and the economy facing multiple threats, raising taxes is the last thing Republicans should be doing. Not one Republican has voted to raise tax rates since 1990, and now is not the time to do so. President Trump has said he is opposed to raising taxes. Every Congressional Republican should be opposed as well.
Republicans Need To Stop Talking About Raising Taxes
May 03, 2025
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