President Biden pledged on the campaign trail to raise the corporate tax rate — an increase that could have a detrimental side effect on the U.S. economy, according to a report published Wednesday morning.
New findings from the Tax Foundation show that increasing the corporate tax rate from 21% to 28% would reduce GDP, the broadest measure of goods and services produced in the country, by 0.8% and eliminate 159,000 jobs. It would also reduce workers’ wages by 0.7%, the nonpartisan organization said.
By hiking the tax rate paid by corporations to 28%, Biden would bring the federal-state combined tax rate to roughly 32%, the highest statutory tax rate in the 37-member Organization for Economic Cooperation and Development, according to the Tax Foundation, “harming U.S. economic competitiveness and increasing the cost of investment in America.”
Biden repeatedly pledged to roll back former President Donald Trump’s 2017 Tax Cuts and Jobs Act, which lowered the corporate tax rate from 35% to 21%, during his presidential campaign.
He also vowed to implement a slew of other tax hikes on wealthy Americans, including restoring the top individual tax rate to 39.6% from 37%, taxing capital gains as ordinary income, capping deductions for high earners and imposing the Social Security payroll tax on wages above $400,000, in order to fund his multitrillion-dollar agenda.
Top American banks could also see their tax bill rise surge if Biden and congressional Democrats raise the corporate rate. A January analysis published by Bloomberg found that the nation’s six biggest banks — JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley — could owe as much as $11 billion more in taxes if Biden increases the corporate rate from 21% to 28%.
That would follow $42 billion of savings by those same banks, which boosted their bottom lines by more than 10% over the past three years after Trump’s 2017 Tax Cuts and Jobs Act slashed the corporate rate from 35% to 21%.
Biden has indicated that he won’t increase corporate taxes until at least 2022 as the U.S. economy recovers from the coronavirus pandemic, which triggered the most severe downturn since the Great Depression.
The corporate tax increase would generate about $740 billion in new revenue over the next decade, according to a recent analysis published by the Tax Policy Center.
Still, the Constitution gives Congress the power to set tax policy, and given the slimmest-possible majority that Democrats have in the Senate, centrist lawmakers will be the ones with the leverage to dictate what happens.