Paul L. Caron

Wednesday, April 24, 2024

President Biden Would Saddle The U.S. With Highest Tax Rate On Corporate Income In The Developed World

Adam N. Michel (Cato Institute), President Biden Would Make the U.S. a Tax Rate Outlier:

President Joe Biden proposes raising the corporate income tax rate, capital gains tax rate, and personal income tax rates, among other tax increases. These hikes would make the United States an international outlier, with some of the highest tax rates in the developed world.

In his fiscal year 2025 budget request to Congress, President Biden proposed about a dozen new or higher taxes that would raise close to $5 trillion in additional revenue over a decade (according to their optimistic forecasting). I detailed the specifics in an earlier piece, “What Does Biden Plan for the Tax Code?

The Biden tax hikes would primarily fall on capital income, leading to less domestic investment, fewer jobs, and slower economic growth. ... Figure 1 shows that Biden’s proposal to increase the federal corporate income tax rate from 21 percent to 28 percent would increase the United States’ combined state and federal corporate tax rate to 32 percent. ... Figure 2 shows net personal dividend tax rates. Under Biden’s proposal, capital gains and dividends would be taxed at a top income tax rate of 39.6 percent, plus a higher net investment income tax rate of 5 percent. ..

Figure 3 combines the taxes in Figure 1 and Figure 2. It shows the total integrated tax rate on corporate income that is first taxed by the corporate income tax and then taxed a second time when it is distributed as a dividend to shareholders. Under Biden’s corporate and investment tax increases, distributed profits in the United States would face a 66 percent integrated tax rate, seven percentage points higher than any other country in the OECD. 

Cato OECD Figure 3

In a global economy, the US must compete for international investment, jobs, and talent. Imposing internationally high tax rates on American workers, investors, and employers would not address the US fiscal problems and would come at a high economic cost.

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