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Donald Trump’s 2017 Tax Cuts and Jobs Act, among many other things, cut the corporate tax rate from 35% (the highest marginal rate in the world) down to 21%.
Biden is now looking to reverse that, and once again bring the U.S. corporate tax rate to the highest in the world – at least if state corporate tax rates are included.
Biden is proposing raising the corporate tax rate from its current 21% to 28%. With state level corporate taxes included, this would create a combined U.S. federal-state tax rate of 32.34%, the highest among OECD Nations.
When asked if he was concerned that corporate tax increases during an economic recovery would cause economic damage, Biden said that there’s “no evidence of that.”
To the contrary, the Tax Policy Center says Biden’s corporate tax plan would reduce GDP by 0.3-0.7% annually for the next decade, cost 159k jobs, and cause a 1.45% drop in income for the bottom 20% of earners. While Biden could try to argue that this is a price worth paying for the revenue needed to fund his infrastructure plan, it is evidence that it would in fact could economic damage.
Below is the international breakdown of international corporate tax rates, posted with permission from Unbiased America:
Only the United Arab Emirates could have higher tax on corporate income, but only on paper. The UAE doesn’t have a federal corporate income tax regime, instead opting to determine tax on a territorial basis. Rates go up to 55%, but this tax is basically only ever enforced on foreign oil companies and branches of foreign banks (which are taxed at a flat 20%).
This is only the developed world, however. Our corporate tax under Biden would would still at least be slightly lower than Venezuela’s (at 34%).
It’s already looking like Biden’s plan will run into issues in the Senate, with Democrat Joe Manchin opposing the 28% hike, voicing support for a hike to 25% instead.
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Author: Matt Palumbo