HIGHER TAXES & DEEP DEBT
and highways, which is what’s commonly regarded as traditional infrastructure. Some of the remaining amount would be dedicated to electric vehicles ($174 billion), R&D investment ($180 billion), universal broadband ($100 billion), and so-called “human infrastructure.” To fund this ambitious spending package, Biden proposes $2 trillion in higher taxes, primarily on corporations. His plan would push the corporate tax rate to 28%, which would – when combined with the 4.4% average state and local corporate tax rate – give the United States the dubious distinction of having the highest corporate tax rate in the industrialized world. This would harm the competitiveness of U.S.- based companies and likely reduce the number of new firms created here. An even larger problem with raising corporate tax rates stems from its incidence, or who will shoulder this higher tax burden. Of course, many proponents of higher corporate taxes believe the burden will be entirely paid by faceless corporations with bottomless bank accounts. However, virtually all economists – regardless of ideology – would dispute this notion. EAT THE RICH The Left-leaning Tax Policy Center, a project of the Urban Institute and the Brookings Institution, suggests that workers bear 20% of the cost of corporate taxes, with the remaining 80% falling on capital or investment returns. By contrast, the Tax Foundation reviewed numerous studies over recent decades that “found labor bears between 50% and 100% of the burden of the
Unfortunately, instead of austerity, the Biden administration is supporting a massive tax-and-spend package. This contains a toxic mix of economically damaging tax hikes and debt-financed new spending that will combine to exacerbate the debt problem and slow the recovery. UNPRECEDENTED SPENDING Biden’s plan contains neither pro-growth tax policies nor substantive spending reductions. To the contrary, the first part of his plan would spend an additional $2.25 trillion under the auspices of infrastructure. Only $115 billion of these funds – or about 5% – are allocated to repairing bridges, roads, spending that will combine to exacerbate the debt problem and slow the recovery. While some have cited former President Bill Clinton’s 1993 tax hike as an analogue, the comparison simply doesn’t hold water. Yes, the Clinton plan included big tax increases, but its primary purpose was to shrink the deficit and balance the budget, which is why it is often referred to as the Deficit Reduction Act of 1993. Instead of trillions in new spending – like Biden’s proposal – Clinton’s plan paired tax increases with hundreds of billions in spending cuts. This, combined with pro-growth policies achieved on a bipartisan basis in subsequent years, led to a strong economy and federal budget surpluses.
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