The Impact of Raising Corporate Tax Rates: Biden’s Proposal and Its Consequences

In recent discussions, President Biden's proposal to raise corporate tax rates from 21% to 28% has been met with varying opinions. While some argue that it will help fund necessary infrastructure improvements in the U.S. under a $2.25 trillion package, others contend that any additional taxes will ultimately fall on consumers and may hinder job creation.

Consumer Impact and Inflation Concerns

The argument that this proposal will merely increase consumer costs through higher prices gained prominence as inflation rates soared during the past three years. Critics like those mentioned in the article suggest that raising corporate taxes will likely result in increased consumer prices. This is because, as the statement goes, corporations do not actually pay the taxes directly but rather pass them on to consumers to maintain their profit margins.

The Complexity of Corporate Taxation

It is a contentious point that corporations do not pay taxes themselves. Instead, they distribute the tax burden to their stakeholders, most notably consumers. When corporate taxes increase, companies may not always pay more in absolute terms but may restructure their operations. This could include investing in research and development (RD) or upgrading work facilities, which might result in better wages for employees. However, the primary beneficiary of these tax changes would typically be consumers in the form of higher prices.

Comparative Corporate Tax Rates and Broader Economic Considerations

It is also important to note that the U.S. already has one of the highest corporate tax rates globally. This high rate often disproportionately affects small businesses, which can struggle under the weight of these taxes. The article suggests that instead of raising corporate tax rates further, a minimum tax rate might be more beneficial to support small businesses without stifling their growth.

The Role of Government Spending in Recovery

In times of economic downturn, as experienced during the COVID-19 pandemic, governments have had to spend heavily to support their citizens and businesses. This required a significant outlay of funds, which now needs to be recouped. While specifics are not provided, the reasoning behind the need for such spending is clear. Recovery from a pandemic requires significant investment to mitigate its long-term effects on employment and infrastructure.

Infrastructure Investment and Future Economic Growth

The U.S. infrastructure, as previously highlighted during the presidency of Donald Trump, often falls short of expectations. Trump’s promises for infrastructure upgrades were widely publicized but often lacked the funding and political will to follow through. Now, under Biden’s plan, the focus is on large-scale infrastructure improvements to maintain the U.S.'s competitive edge in the global market and ensure a strong economy for the future.

Conclusion

While it is clear that raising corporate tax rates aims to address critical infrastructure needs, the potential consequences on unemployment rates and consumer prices remain significant. As the article concludes, the real beneficiaries of these high corporate rates are often the consumers. The current debate highlights the complex interplay between government policy, corporate strategy, and economic recovery.

Further Reading

For those interested in delving deeper into the topic, resources on corporate tax policies, infrastructure investment, and economic recovery during and after pandemics are available. Understanding these areas is crucial for formulating effective policies and strategies that balance business interests with the public good.