If you’re an American of average income, listen up. You’re about to become a lot poorer. President Joe Biden’s proposed soon-to-be-unveiled multi-trillion dollar tax hike, the first major increase in taxes since 1993, will ensure that.
With a massive wave of new spending on the way, it was only a matter of time before Biden and his far-left economic team came up with massive new tax increases to match. You might be happy with your $1,400 “stimulus check,” but you won’t be happy with the higher taxes you’ll be paying from now until you die.
That’s right, because no matter what the Democrats said during last year’s presidential campaign about “taxing the rich” and “big corporations” it’s the middle class and the poor who will really take a hit.
Though still in the discussion phase, the White House says only those earning more than $400,000 a year will feel the pain. They’ll face higher taxes on their estates and so-called pass-through businesses, including limited-liability companies and partnerships. Millionaires might get a double-whammy, with both higher income and capital gains taxes.
A tax-fairness win for the little guy? Don’t believe it. Biden also wants to raise the corporate tax rate from the current 21% to 28%, a one-third increase. And that tax on “pass-through” businesses? That’s a tax-code euphemism for “small businesses.”
Stick it to the man, right? Sorry, but the man is you.
“Tempting though it is to wish that faceless entities like corporations would shoulder the burden, sparing individuals the pain, in reality corporate taxes are always financed by people,” notes economist Michael Strain of the American Enterprise Institute. “The only question is which ones.”
The fact is, when corporate and small business taxes go up, workers’ wages and benefits go down. That’s not even controversial among economists. At least not the sane ones.
The Congressional Budget Office, for instance, automatically assumes when government raises taxes on corporations, roughly 25% of that comes right out of workers’ pockets. Private economists’ estimates are much higher: 50% and more.
Whatever’s left comes straight from consumers and investors, who are often the same people. They pay through higher prices (consumers) and lower returns on investments (investors). Remember: If you have a 401(k), you too are an investor.
The corporation pays nothing. People do.
Worse, as the Committee to Unleash Prosperity pointed out this week, “Treasury Secretary Janet Yellen is also exploring a carbon/energy tax and a 2% annual wealth tax.”
Add it all up, and American companies would once again have the highest overall tax rates in the developed world. We’d again be uncompetitive with other nations, meaning fewer jobs and less investment here. An energy tax would hamstring U.S. producers, and discourage those with wealth from investing more at home.
A slow-motion economic disaster in the making.
How is that good for anyone?
Whenever you tax something, you get less of the thing you tax. That’s a truism, not an opinion. Want fewer businesses and slumping sales? Less hiring? Lower wages? Fewer and lower benefits for employees? Just raise taxes on corporations.
And you’ll also get a much weaker economy over the long term.
The nonpartisan Tax Foundation forecasts that even raising just the corporate tax rate from 21% to 28% — one of many tax hikes the Biden administration is considering — would have serious negative impacts on the economy.
“After accounting for reduced economic output in the long run, after-tax incomes would fall by about 1.8% on average, ranging from a 1.3% reduction for households in the 20th to 40th income percentiles to a 3.2% reduction for households in the top 1%,” the forecast said. Meanwhile, long-run GDP will decline by 0.8%, capital stock by 2.1% and workers’ wages by 0.7%. Oh, and 159,000 jobs would be permanently destroyed.
Yes, the rich will take a hit. Their incomes will shrink by about 3.2%. But guess what? They’re rich, and 3.2% won’t hurt a bit. But income for those in the low- and middle-income brackets would decline 1.3% to 1.5%. And they will feel it.
Welcome to Bidenomics: Trillions of dollars more for an incompetent and wasteful federal government, and far less money for you and your family. If you voted last time around thinking it would be different, you’re in for a rude awakening.
Back in January, Biden said he would back a major increase in the deficit, but wanted a large tax hike as part of a so-called “recovery plan.”
Except the economy is already recovering. The most recent GDP Now forecast from the Atlanta Federal Reserve Bank, which takes into account the most recent data, sees 5.7% GDP growth in the first quarter.
Does Biden think that a huge tax increase to pay for unproductive government spending is the way to make the economy grow, now and in the future? No. But he and his far-left political party desperately want more power. What better way than to take money from you, then claim it’s all for your own good?
The size of the tax hikes for huge new spending programs, including a largest-ever infrastructure program and the wasteful New Green Deal, should produce concern. “The overall program has yet to be unveiled. Nevertheless, analysts are penciling in between $2 trillion to $4 trillion (in new spending and taxes),” writes the financial website ZeroHedge.
That will entirely undo President Donald Trump’s tax cuts, which boosted both economic and job growth sharply beyond almost everyone’s estimates. Those tax cuts and deregulation are the real reason for the economy’s sharp snap-back after last year’s record double-digit GDP declines during the early part of the COVID-19 outbreak.
Worse, Biden’s plan will do nothing to make taxes “more fair.” As we noted, poor and middle-class Americans will applaud tax hikes for “stickin’ it to the rich.” That is, until they find that Bidenomics will be “stickin’ it” to them, too.
— Written by the I&I Editorial Board