Generally, business leaders support spending government funds on infrastructure, as they believe that it will bolster the US economy. However, they strongly oppose higher tax rates.
American business leaders are bracing themselves for President Joe Biden’s proposed increase in taxes on large corporations.
Following Biden’s US$2.3 trillion infrastructure plan, this development is poised to raise corporate tax rates nationwide from 21% to 28% and increase taxes on the foreign earnings that companies bring in.
The proposed tax change has the potential to replace an enormous amount of the international tax structure that came with the 2017 Tax Cuts and Jobs Act. Many companies across the United States are also considering the possible ramifications of the global minimum tax for multinational corporations that Treasury Secretary Janet Yellen shared earlier this month.
Business leaders are worried that the Biden administration’s plan to finance a significant federal infrastructure agenda by raising taxes on corporations will negatively impact the overall economy by killing jobs.
Additionally, a recent NAM study (National Association of Manufacturers) stated that the proposed tax increase on corporations had the potential to lead to one million fewer jobs in the proposed infrastructure plan’s first two years. The NAM study also discovered that by 2023, the US’ gross domestic product (GDP) would be down by about US$117 billion.
The study also found that the US’ GDP would be down by US$190 billion in 2026 and by US$119 billion in 2031. The study concludes that the hike in tax rates will influence businesses by causing them to make less capital investment overall.
The Business Roundtable, a research group representing America’s most prominent businesses, reported in a recent survey that approximately 98% of chief executive officers believe that raising corporate taxes would have a moderate to very negative impact on their companies and would negatively harm wages, investment and US competitiveness around the world.
The Biden administration wants to raise the corporate tax rate by 7% to bankroll its US$2.3 trillion infrastructure proposal. The plan allows for a significant amount of spending on infrastructure projects such as the construction and repair of roads, bridges and ports.
Generally, business leaders support spending government funds on infrastructure, as they believe that it will bolster the US economy. However, they strongly oppose higher tax rates.
White House officials have dismissed these concerns, stating that there is no concrete proof that increasing taxes would significantly cause harm to the economy or hamper its recovery.
The Biden administration remains firm in its belief that the plan would improve the economy and officials have argued that the economy did not see any significant improvement after the Trump administration reduced the corporate tax rate from 35% to 21% at the end of 2017, a significant decrease.
Critics of Trump’s tax cut strategy also suggest that many companies were simply taking temporary advantage of investment perks. While both The Business Roundtable and the US Chamber of Commerce have come out against Biden’s tax plan, historically both groups have been opposed to tax increases.
West Virginia Senator Joe Manchin, a Democrat, said that although he was opposed to raising the tax rate to 28%, he would be willing to accept an increase. Getting Manchin’s support for any bill is critical in a Senate in which Democrats only have a one-vote advantage, especially as Republicans would almost certainly be universally opposed to the proposal.
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