Tax Increases Will Not Solve the Affordability Challenge

Congressional Democrats keep saying they are focusing on the affordability crisis, promising that they will soon come up with an agenda to lower costs for working people. What they won’t tell you is that their real affordability agenda centers around one policy priority—-increasing taxes on the American people to fund new spending programs, and they are already working on their tax increase plans.

A new paper by a leading Democratic economic adviser and strategist spells out in detail how their plans to address the cost of living will “require raising taxes on a far larger scale than ever before.” The paper is authored by Bharat Ramamurti, a top economic adviser in the Biden-Harris White House who helped shape the administration’s economic message. He has also served as a top economic adviser to Senator Elizabeth Warren. He is an influential voice in the Democratic Party, and he is calling for significant tax increases to pay for significant new spending.

His paper advises Democrats that they must “raise as much tax revenue as possible,” and urges them to “put as many new tax increase options on the table as possible.” He tells Democrats they need to raise a minimum of $360 billion a year in new taxes, or $3.6 trillion over ten years, and as much as $480 billion a year to fund priority programs, or nearly $5 trillion in new taxes over ten years.

Should Democrats follow his advice, American working families would find their lives much less affordable, with lower wages and fewer jobs. The major tax increases he proposes would repeal all the Republican tax cuts, raising individual tax rates, capital gains rates, estate taxes, and corporate taxes. He would raise the corporate tax rate to 28%, to a combined federal-state rate of nearly 33%, one of the highest rates in the world.

All of these tax increases would reduce investment and growth, and end up costing working families thousands of dollars a year in lost wages and income. An extensive body of economic research shows that workers bear the burden of a higher corporate tax rate, and that raising the corporate rate would result in reduced income and fewer employment opportunities.

One recent study found that a one percentage-point increase in the corporate tax rate would reduce hourly earnings by as much as 0.88%. That means that increasing the corporate rate to 28% would cost a medium income American family more than $5,000 a year in lost income.

An affordability agenda of higher taxes and more spending would worsen the affordability crisis for American working families. The U.S. needs lower taxes and less spending to encourage investment and productivity and a higher standard of living for all.