Issues & Insights

How Bidenomics’ Shock Taxes Will Make You Much Poorer

Photo: Gage Skidmore, Creative Commons, Share Alike 2.0 Generic license

I&I Editorial

Facing perhaps their most important election ever, Americans have much to worry about: Urban riots and political violence, a loss of respect for our basic constitutional rights and American institutions, and the spate of socialist-inspired radical policy proposals from the Biden campaign. Here’s one more thing: the ruinous taxes you’ll have to pay for the left’s socialist wish-list if Joe Biden wins.

A recent study by a group of highly regarded economists at the Hoover Institution, including two former members of the Council of Economic Advisers, found that the full panoply of Biden’s policy proposals — Medicare for All, big tax hikes on the wealthy and the working poor, the massively expensive Green New Deal, and thousands of impending regulations — would have devastating consequences for the U.S. economy.

Why? Not only would they destroy the economy’s current renewed momentum, but they would require enormous tax increases on all Americans, businesses and individuals alike. It would hit the U.S. economy with its largest tax shock ever, and take it down.

The size is beyond dispute. As President Donald Trump would say, the coming tax-hike tsunami from Bidenomics would by “Yuuuge.”

According to the nonpartisan Committee for a Responsible Federal Budget, Biden’s projected tax increases total $4.3 trillion over the next decade, and that’s a conservative estimate. Trump, meanwhile, would cut taxes by about $1.7 trillion. The quick math: That’s a $6 trillion difference.

“We estimate that the full Biden agenda will reduce long-run real GDP per capita by more than 8% as a result of reducing full-time equivalent employment (FTEs) per person by 3%, the capital stock per person by 15% and total factor productivity by 2%,” the Hoover Institution study said.

Based on current growth estimates by the nonpartisan Congressional Budget Office, “this suggests there will be 4.9 million fewer employed individuals, $2.6 trillion less GDP, and $1.5 trillion less consumption in that year alone. Median household income in 2030 would be $6,500 less.”

Still, many have applauded Biden’s call for income and Social Security tax hikes on those earning more than $400,000, part of the Democrats’ laughable war on inequality. He would also raise top corporate tax rates from 21% to 28%, making companies pay “their fair share.”

But, as always, higher taxes have consequences.

“Biden’s plan to raise personal income and payroll tax rates would push (some) federal rates from below 40% to, often, above 50%, and these are on top of state income taxes,” the study’s authors found.

But those taxes wouldn’t just hit the so-called “rich” and big corporations. They’d take down productive parts of the economy, especially small businesses, the heart and soul of our nation’s success.

For instance, many small businesses are “pass-through” entities, meaning their owners are taxed at the individual taxpayer rate. A successful small business would thus be hit by a major tax hike, pushing many into bankruptcy or forcing them to let workers go. By the way, these businesses employ 40 million people. Think about that.

Biden’s also an ardent supporter of the proposed $15 an hour national minimum wage, for tipped workers, as well. It sounds generous. If people aren’t making enough, why not have government force employers to pay them more?

Unfortunately, as has been shown in case after case, mandated hikes in minimum wages don’t help poor, struggling workers; they hurt them. And a minimum wage, perversely, is itself a job-killing tax on employers. And everyone knows, when you tax something you always get less of that thing in return.

If you don’t believe it, a new study from the Employment Policies Institute shows Biden’s planned $15 an hour national minimum would have a devastating impact on low-income earners.

Right now the minimum is $7.25 an hour. By more than doubling it, some 2 million jobs would be lost, EPI estimates. Many of those losing out will be low-skilled workers with little education, including many Hispanics and African-Americans.

Hardest hit of all, however, will be struggling female workers.

“Not only are 59% of minimum-wage jobs held by women and slated to be affected by these wage increases, this means that 1.2 million jobs held by women will be lost by 2027 due to this policy, accounting for 61% of total losses,” the report said.

Just as bad, as noted above, the minimum wage hike will hit struggling small businesses, the nation’s main employers.

“Increasing labor costs through a federal $15 minimum wage would only bring businesses — and the people they employ — closer to the point of no return,” EPI managing director Michael Saltsman said in an interview with the Washington Free Beacon.

Finally, there’s the proposed 2% wealth tax on the truly rich, an idea proposed by Massachusetts socialist Sen. Elizabeth Warren and part of the Biden campaign’s tax conversation. It would tax the wealth, not the income, of those who have $50 million or more in household wealth at 2%. For those over $1 billion, it goes up to 6%.

If this makes you all warm and fuzzy, as it does the increasingly far-left Democrats, you might want to rethink that. A recent study by the Center for Freedom & Prosperity, a respected free-market think tank, estimated the following results of such envy taxes:

  • “Long-run GDP decline of roughly 2.7% (relative to a steady state with no wealth tax) due to a decline in the capital stock of roughly 3.7%;
  • “An immediate loss in hours worked of 1.1%, equating to approximately 1.8 million jobs, and a long-run loss in hours worked of 1.5%;
  • “Initial decline in average annual household real wage income of about $2,500;
  • “Explosive welfare state growth as transfers relative to GDP (excluding SS) increase by 70.1%;
  • “Per-household wealth held by the top 0.25% falls by $3.7 million, and from lower-middle to upper-middle households, declines in lifetime wealth range from $440 to $49,660.”

That’s not sweet revenge on the rich – it’s foolish, self-defeating envy, the engine that keeps socialism running.

Kenneth Langone, a co-founder of Home Depot, one of the most successful retailers of the last 50 years, knows something about the middle class. That’s where his customers are found. He says don’t be fooled: Even taxing the rich won’t pay for the Democrats’ extravagant spending plans. Eventually, lacking enough money, the Democrats’ tax increases will hit everyone. Yes, that means you.

Here’s what Langone told Fox Business’ Maria Bartiromo:

I don’t know if there’s any of us that have done well that will have a problem with paying more taxes, but it’s a ruse to think that hitting us and us alone is going to get the job done. It won’t and the middle class will be in peril and when you take money out of the hands of the middle class, you do a dramatic impact negatively on the economy.

“The middle class will not be exempt,” he added. “Tragically, it will punish them. It isn’t going to punish us.”

Yet another thing to consider as you cast your ballot: America will be a much poorer place under tax-heavy Bidenomics than under Trumponomics. Choose wisely. And don’t say you weren’t warned.

— Written by the I&I Editorial Board

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1 comment

  • Re: the $15 “minimum wage” –

    The other nasty thing about this is, IIRC, that many union contracts are based on a multiple of it. Minimum wage goes up, so do labor costs.

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