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President Biden is touting his new $2.3 trillion+ spending plan as a boon to workers, even dubbing it the “American Jobs Act.” But there’s reason to believe that a key provision in Biden’s plan would result in a sizable drop in income for millions of American families.
Article by Brad Polumbo from FEE.
The president wants to pay for his multi-trillion-dollar spending proposal in part by raising the corporate tax rate from 21 percent to 28 percent. A new study from the conservative-leaning Heritage Foundation finds that this tax increase on “Big Business” would ultimately be borne in large part by workers. Heritage macroeconomist Parker Sheppard projects that the economy would shrink to the tune of $1,650 lost per household, with the median worker seeing an $840 decline in their annual income.
A corporate tax rate of 28% would reduce long-run GDP by about 0.96%—about $1,650 per American household. https://t.co/F7KrhgmTsD
— Heritage Foundation (@Heritage) April 18, 2021
One mistake many people often make is assuming that whoever is formally assigned a tax is also who ultimately bears the costs. But this isn’t necessarily the case, because people change their behavior as a result of tax increases—raising prices, decreasing investment, changing consumption habits, and so on.
“It is the operation of the market,” wrote Austrian economist Ludwig von Mises, “and not the government collecting the taxes, that decides upon whom the incidence of the taxes falls and how they affect production and consumption.”
“Who pays the tax?” economist Murray Rothbard asked. “It would seem that the answer is clear-cut, since the government knows on whom it levies a tax. The problem, however, is not who pays the tax immediately, but who pays it in the long run.”
In the case of corporate taxation, an overwhelming body of research confirms this theory and shows over the run, the costs are mostly borne by workers via reduced wages and partially by consumers via higher prices.
Because corporate tax increases make investment more expensive, and investment in productivity improvements is key to wage growth. As Mises lucidly explained, “More investment of capital means: to give to the laborer more efficient tools.”
When this investment allows workers to become more productive, their wages will soon rise.
“As the employer consequently will be in a position to obtain from the consumers more for what the employee has produced in one hour of work, he is able—and, by the competition of other employers, forced—to pay a higher price for the man’s work,” Mises concludes.
In the case of corporate tax hikes, the opposite occurs: investment is reduced and wages fall as a result.
“Workers with newer or improved equipment, or places to work, are more productive and can command a higher salary,” Sheppard explains. “If the corporate tax causes firms to reduce their investment and operate with less capital, they will pay lower wages as a result.”
The Heritage study finds that Biden’s proposed corporate tax hike will significantly decrease investment into new business equipment and structures, which leads to lower wages over time.
Here’s the bottom line.
Promising to pay for his massive spending schemes by raising taxes on “Big Business” may serve President Biden well politically, but the laws of economics are unmoved by public opinion polling. There’s no getting around the fact that a key aspect of the White House’s grand plan to put Americans back to work is projected to boomerang back in workers’ faces.
One Sick Day Proves We Need More Voices in Truthful Media
On October 19, I was sick. It crossed my mind that I had finally gotten the ‘rona, but my wife’s cream of chicken soup and a few extra hours of sleep into mid-afternoon had be back up and running after a sleepless night before.
When I finally stumbled over to my computer in the evening, I was met with a deluge of concern from readers. They asked what had happened as only one article had been posted that day. Generally, we post between 10-20 daily between all of the sites, not included curated and aggregated content. Seeing that we’d only posted my super-early morning article before taking the rest of the day off had readers assuming the worst.
We have a wonderful and talented group of writers who volunteer their time for the sites and their readers. Sharing their amazing perspectives has always been a blessing to us because we cannot afford to hire anyone at this time. But having great writers is meaningless if we don’t have great editors, or at least one additional. My wife helps me read and edit stories from time to time, but I’m a one-man show when it comes to getting the stories posted.
Whenever I highlight our desperate need for donations, I note that we do not receive money from Google ads even though most in conservative media are beholden. I often ambiguously note that the money donated will help us grow. Today, I’m highlighting a specific need. We must get an editor to help take some of the load and to expand on our mission of spreading the truth to the world. One sick day proved that.
The great news is that there is no shortage of people who CAN help. I am emailed variations of resumes every week by people who are much smarter than I am. As much as I’d love to hire some of them, we simply cannot. That takes money and as blessed as we’ve been to receive donations and collect ad money (though not from Google or Facebook), we have still fallen short.
Those who have the means, PLEASE consider donating. We have the standard Giving Fuel option and people can donate through PayPal. We are also diving into what we believe is extremely disruptive technology at LetsGo.finance, the world’s first major donation portal for crypto. I’ll be talking a lot more about them in the near future. Those who prefer Bitcoin can send to my address here: 3A1ELVhGgrwrypwTJhPwnaTVGmuqyQrMB8
We can get the voices out there and we’re willing to shine a spotlight on new talent. We just need the resources to make it happen. If you can help, we would be extremely grateful.
Thank you and God bless!
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