This month, U.S. senators began the markup of the Democrats’ $3.5 trillion budget resolution package. This rubber-meets-road moment seems to have given pause to some in their party whose votes will be needed to get a bill through Congress and across the president’s desk. Among them is Montana’s Sen. Jon Tester.
The president and the progressive left members of Congress have proposed financing the administration’s marquee spending bill largely by raising the U.S. corporate tax rate. It is a moral imperative, they say, to make big business “pay its fair share.” In April, a notably fiery President Joe Biden re-upped his call to raise the federal rate by a third, stating, “I’m sick and tired of ordinary people being fleeced.” Yet ordinary people are exactly who will pay for this tax increase.
A fundamental problem with the president’s argument is that corporate taxes ultimately get passed on to workers and their families, which make up the core of our economy. Research by the Tax Foundation finds that 70% or more of corporate taxes fall on laborers through reduced wages, fewer jobs and career advancement opportunities, less investment in productivity drivers like equipment and technology, and increase incentives to shift profits and move headquarters out of the United States.
In other words, the president’s desire to raise taxes on businesses effectively amounts to a tax increase on workers along with consumers of their goods. And, as the Tax Foundation analysis notes, low-income earners suffer worse impacts than others higher up the ladder. Of course, when families earn less, they spend less, creating a ripple effect up and down our economy.
Less than four years ago Congress voted to reduce the federal corporate tax rate, which was then the highest among member countries of the Organization for Economic Cooperation and Development (OECD). Lowering the tax rate opened the gates to significant investment and growth, here in Montana and across the country.
Between 2018 and 2020, some $1.6 trillion of investment in jobs, manufacturing, and workers poured into the United States. Capital investments outpaced averages over the prior two decades. No major businesses have relocated overseas since the corporate rate was lowered. The lower tax rate wasn’t some handout to corporate America. It was a realignment to put U.S. businesses on more level footing with competitors around the world, creating more jobs and opportunity for Americans.
President Biden’s tax and spending agenda is putting all of that at risk. Now more than ever, we need some Democrats in Congress to stand up for American businesses, workers, and our economy. The nation’s eyes will be on Tester and others. I encourage our Democratic senator to buck factions within his party and vote to keep the corporate tax rate competitive and reasonable for the benefit of our country and Montana.
Greg Hertz is a Republican state senator from Polson.
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