Biden needs to shelve tax increases and focus on spending
Bruce Thompson
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With the country bumping up against the $31.4 trillion debt limit, President Joe Biden has suddenly offered his solution to the debt crisis: raise more taxes on the public. Biden tweeted his “plan” to raise taxes by nearly $3 trillion.
The Biden plan contains eight tax increases and no real spending cuts. He believes that budget deficits are caused by not taxing the people enough.
https://twitter.com/POTUS/status/1660316196909072390
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But the massive deficits and debt we are facing are not caused by not collecting enough taxes but by unchecked spending. The Biden budget increases taxes and spending to record-high levels over the next 10 years, and we would still have massive deficits.
Taxes as a share of the economy under his budget would average 20.1%, much higher than the 50-year average of 17.4%. Spending as a share of the economy would average 25.2%, nearly 5 percentage points higher than the 50-year average of 20.5%.
Raising taxes now as the economy is slowing down would be a major economic mistake. The largest Biden tax increase would raise the U.S. corporate tax rate to the highest rate in the developed world, taking $1.3 trillion out of the private economy. His plan would increase the combined federal-state tax rate to 32.8%, much higher than China’s rate and 50% higher than the average Organization for Economic Cooperation and Development rate, putting U.S. companies at a major competitive disadvantage against our trading partners.
Raising the U.S. corporate rate now would harm the economy, slowing economic growth, cutting investment, and increasing layoffs. A higher corporate tax rate would hurt working families and small businesses as it rippled through the economy.
Studies have shown that raising the corporate tax rate leads to lower wages for working families, costing the typical household thousands of dollars a year in lost income. Studies have also shown that a corporate rate hike raises costs at the consumer and wholesale levels, increasing consumer prices across the economy.
With most economic experts forecasting an economic slowdown in the coming months, Biden needs to shelve his tax increases and work with congressional Republicans on slowing the growth of federal spending.
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Bruce Thompson was a U.S. Senate aide, assistant secretary of Treasury for legislative affairs, and the director of government relations for Merrill Lynch for 22 years.