Log in

Tax Policy Proposals Endanger Economic Recovery & Growth

Sun, February 28, 2021 9:49 AM | Anonymous member (Administrator)

Analysis of early versions and expectations of a new Biden Administration proposed tax system is setting off alarm bells with regard to the potential negative impacts it may have on the country’s economic recovery and potential growth.  The President’s views on taxing policy received very little coverage or scrutiny during the campaign and has remained largely in the background over the first month of this new administration, which has been dominated by his Executive Orders.  Any changes will have to survive likely filibusters in the Senate, meaning a 60-vote consent to move forward, but that is not entirely “bullet proof” given the Democrats willingness to end-run the traditional and widely accepted procedural system that has earned the upper chamber the distinction of being the “most deliberative body in the world.”

Key Findings:

(1) Several changes to the corporate income tax, including raising the rate from 21 percent to 28 percent and imposing a 15 percent minimum tax on corporations with $100+ million in book income. These proposals are being considered to raise revenue for new spending programs and would repeal changes to the corporate tax made by the Tax Cuts and Jobs Act (TCJA) in late 2017.

(2) An increase in the federal corporate tax rate to 28 percent would raise the U.S. federal-state combined tax rate to 32.34 percent, highest in the OECD and among Group of Seven (G7) countries, harming U.S. economic competitiveness and increasing the cost of investment in America. The Tax Foundation estimates that this would reduce long-run economic output by 0.8 percent, eliminate 159,000 jobs, and reduce wages by 0.7 percent. Workers across the income scale would bear much of the tax increase. For example, the bottom 20 percent of earners would on average see a 1.45 percent drop in after-tax income in the long run.

(3) A minimum tax on the book income of large corporations would target gaps between financial and taxable income that generally exist because the rules for taxation differ from standards for reporting income to shareholders. Such a minimum tax would likely introduce additional complexity and distortions into the tax code and generate relatively little tax revenue, in part because firms have a degree of flexibility in reporting book income. The tax would potentially undermine current-law investment incentives as well as those proposed by President Biden, such as the “Made in America” tax credit.
(SEE, Chart on OECD Tax Levels, and The Tax Foundation’s report for details:

https://taxfoundation.org/biden-corporate-income-tax-rate/#Key )

Construction Industry Round Table (CIRT)  ·  8115 Old Dominion Dr., Suite 210  McLean, VA  22102-2325  · (202) 466.6777  ·  cirt@cirt.org  · Legal Notices
Copyright 2018 · All Rights Reserved.

Powered by Wild Apricot Membership Software