Joe Biden is both our oldest president and maybe the least successful in living memory. The octogenarian has overseen an 18% increase in overall prices, a 5% decrease in average weekly paychecks, and the lowest popularity heading into a reelection campaign in documented history. Naturally, Biden sees skyrocketing prices ticking off the entire country and will posit a brilliant solution during his State of the Union address: to increase prices even further by raising the corporate tax rate to 28%.
As you may recall, the truly revolutionary facet of former President Donald Trump’s Tax Cuts and Jobs Act was not the mere simplification of the tax code, which indeed translated to personal tax cuts for the middle class, but rather its reduction of the corporate tax rate. Prior to 2017, our corporate tax rate topped out at an appalling 35%, higher than any other advanced nation and all but three countries worldwide (the United Arab Emirates, Chad, and Puerto Rico). The legislation reduced the rate to a flat and globally competitive 21%, just 2 points lower than the world and OECD average but still higher than Europe overall.
As a result, American corporations repatriated $62.3 billion in foreign-earned profits the year after the rate went into effect, and foreign investment in the United States increased by nearly 9%. A longer-run study by economists from Princeton, Harvard, the University of Chicago, and the Treasury found that total additional investment impelled by the corporate tax rate cut increased the economy by 0.1 percentage points annually or a long-run average wage increase of $750. None of this, obviously, accounts for the reduced price pressure of lower taxes being passed on to the consumer.
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Even so, the Tax Cuts and Jobs Act coincided with overall increased corporate tax revenue, which has nearly doubled on a federal level since 2017.
Alas, Biden would rather score a headline and make the public pay the price. A 28% corporate tax rate is higher than that of every other continent but South America, but it sure sounds nice to his base.
