Promising the first major tax hike in decades, Joe Biden argued that the measures would bypass the average American. As it turned out, he lied.
On Monday, a leading White House economist assured that the US president does not want to burden those whose annual earnings do not exceed $400,000 a year with additional taxes. At the same time, the Biden administration is ready to push for an increase in the corporate tax rate. The problem is that these two goals are mutually exclusive, since raising the corporate rate will naturally reduce the income of the middle class, writes Bloomberg.
In 2017, the corporate tax rate was reduced from 35% to 21%. Biden intends to increase it to 28%. Naturally, by promoting such an idea among the masses, the elderly Democrat placed the entire burden of spending on faceless corporations, avoiding the fact that corporate taxes are always funded by workers.
Beneficiaries of American corporations have long found a way to protect their capital from tax increases. This was facilitated by the elementary withdrawal of finances abroad. At the same time, employees are less mobile and therefore more vulnerable to higher income taxes.
A higher corporate rate reduces the after-tax return on additional investments. Less investment makes workers less productive, which in turn reduces their value. If workers are less valuable, businesses will reduce their efforts to attract and retain them, which will affect wages as well. In this way, it is the working class that will pay the price for Biden’s ambitions.
Research from the Center for Tax Policy shows that 20% of the corporate tax burden falls on workers. The nonpartisan Congressional Budget Office estimates the figure to be 25%. These facts will be reflected in the debate over Biden’s tax policy.
“However, the quality and winner of the political debate will not change the fact that workers – including those with incomes below $400,000 – will face a drop in wages if Biden raises the corporate rate”, – Bloomberg said.