President Joe Biden says the government’s massive new rights in its âBuild Back Betterâ plan will be paid for by âbusinesses and those at the topâ. However, the plan’s taxes would hit low- and middle-income Americans with reduced savings, lost jobs, lower wages, higher prices, and more taxes.
The House of Representatives version of the plan is targeting about three-quarters of its business tax increases, either directly or through capital gains.
At first glance, dipping American businesses seems like a good way for the government to fill its coffers. As the saying goes, the only fair tax is the one someone else pays.
However, if implemented, the proposed taxes will affect the wallets of anyone with a 401 (k), anyone who works for a company in America, and anyone who purchases American products. In short, a tax on American businesses is a tax on all Americans.
Businesses, especially large ones, make good scapegoats. However, we rely on them for almost all the goods and services we receive. Most American households rely on businesses for one or more paychecks. If the federal government destroys American businesses with punitive taxes, American consumers will be able to buy fewer goods and services but at higher prices. Recent estimates show that labor, not capital, bears the bulk of the corporate income tax burden.
Suppose Congress and Biden go ahead with the proposed $ 1.5 trillion in new business taxes. Before the ink dries on Biden’s pen, many investors in American companies will rush for the doors, pushing the stock market down and reducing the value of Americans’ retirement savings.
If an American company wishes to invest in a new plant, the outflow of investors will make it difficult for the company to raise funds. Companies will abandon otherwise attractive investment opportunities like new buildings, machinery and equipment.
Investments from abandoned businesses will mean fewer jobs. American workers who would have been employed in a new factory could instead find themselves unemployed.
In other companies, workers will remain employed but will lose bonuses and salary increases. With higher unemployment, American workers will have less leverage to negotiate with their employers.
To avoid what would become one of the least favorable tax environments in the developed world, some companies will choose to relocate or keep their operations overseas, rather than expanding in the United States.
It is difficult to estimate the exact extent of the job losses that this giant 2,465-page bill will cause. Few people have read it all, no one fully understands it. What we do know is that in addition to the new taxes, it also contains new mandates for employers and additional benefits for those who are not working. None of this is a recipe for growth.
Who will be most affected by government-induced job losses? If history is any indication, Americans working in manufacturing, transportation, construction, oil, gas and mining are the hardest hit.
During the last three US recessions, the unemployment rate for Americans in managerial and professional positions has increased by about 3%. In occupations of the production, transport and movement of materials, the unemployment rate jumped by about 7.5%. In construction and mining, it jumped over 9%.
If the US economy falters, blue collar workers will suffer more than their fair share of job losses.
Official government estimates show that taxes will rise not only for the very rich, but also for middle- and low-income Americans. Government estimates paint a deceptively rosy picture of the impact of proposed taxes on low-income Americans by ignoring indirect impacts and confusing what is included in âfederal taxesâ and what is not.
For example, nearly $ 100 billion in new and increased federal tobacco and nicotine taxes are excluded from the published effects of federal tax provisions.
Omissions like this skew the tax impact figures for low-income Americans, as tobacco taxes hit Americans at the bottom of the distribution particularly hard. Compared to all other Americans, Americans in the bottom fifth today spend about six times as much of their income on federal tobacco excise taxes as other Americans.
Also contributing to the confusion, official estimates classify new welfare payments as federal tax cuts, even payments going to Americans who do not pay taxes. The House bill adds more than $ 600 billion in “refundable” tax credits. For most Americans, a refund means getting back the money they paid. For the IRS, refundable means it can send checks to people claiming the credits, whether or not that person has paid a single penny in tax.
The most damaging part of the House bill, however, is not that it would impose harmful new taxes. It is that these tax revenues would go towards a socialist wishlist of programs that entrench rights and threaten America’s future prosperity.
The United States is in debt of $ 28.4 trillion and its existing compensation programs are threatened with insolvency. Rather than consolidating debt or making pro-growth reforms, the new spending would only discourage work and foster a culture of dependency that robs people of their purpose and dignity.
How will future generations cope with the debt we are putting at their feet if they are not raised in a culture that values ââhard work and entrepreneurship?
The American people do not need more taxes and government programs. They need the federal government to step back, stop spending their money, and stop trying to control all aspects of American life.
This piece originally appeared in The Daily Signal