Less than four years after his predecessor passed nearly $2 trillion of tax cuts for wealthy individuals and corporations, President Biden has announced that he wants to do the opposite: he wants to raise taxes on corporations.
If he accomplishes this goal, Biden won’t just go down as one of the strongest champions of economic reform the Oval Office has ever seen — he’ll also be leading the US out of a decades-long failed experiment in relying on low taxes for economic growth. This plan would mark the end of the Ronald Reagan era of trickle-down economics and the beginning of a new commitment to investing in the American people and the American economy.
This departure from the once-unanimous consensus in Washington, D.C. that tax cuts for corporations are good comes on the heels of trickle-down economics’ greatest failure. In 2017, the Trump tax cuts were sold as a way to boost investment in the economy and make U.S corporations more globally competitive. But nearly 4 years later, everyone knows that the tax cuts did not lead to an increase in investment whatsoever. In the two years preceding the law’s passage and two years after the law’s passage, the economy grew at nearly the same rate. What did the tax cuts increase? Corporate profits, inequality and CEO pay.
In the coming weeks, CEOs and conservative members of Congress will surely cry that a pandemic is no time to be raising taxes on corporations, but take it from a millionaire: they are not paying taxes now and there has never been a better time to ask corporations to pay their fair share. Corporations can afford to pay more, especially if doing so will enable programs that will build the middle class, create good jobs, grow the economy and invest in our future.
The Fortune 500 companies on average paid only 11.3 percent taxes on their profits in 2018, a full 10 percent lower than the current statutory rate. Ninety-one of those companies, which includes some of the most successful corporations in the country — like Amazon, Starbucks and Netflix — paid no federal income taxes whatsoever. And it was just recently reported that last year fifty-five of the nation’s largest corporations paid no federal income on their profits. Many of these companies have billions of dollars in profits, but thanks to a low corporate rate and a complicated system of loopholes and deductions (most of which are not available to small businesses), they end up paying nothing.
The Biden Made in America Tax Plan would fix this. Biden’s proposal will increase the corporate tax rate from 21 percent to 28 percent, a change that would raise $730 billion in revenue over the next 10 years according to the Tax Policy Center. More importantly, Biden’s proposal would also impose a global minimum tax on profits from global subsidiaries and dismantle incentives to relocate assets and jobs offshore. Multinational corporations have been playing by a different set of rules than most American businesses and eliminating their ability to hide their profits overseas would actually raise more revenue than increasing the corporate tax rate.
The proposal is estimated to create $1.8 trillion in new revenue over the next 10 years, but this is about more than just revenue. As the past year has proven, the U.S. can afford to rely on deficit spending. The reason these tax increases are so important is because they lay the groundwork for a tax code that reflects the core values of this nation and equalizes the playing field between small businesses and giant multinational corporations. It moves us toward a tax code that incentivizes corporations to do things that are good for the country, and one that pays for what we need and shares those costs fairly.
Corporations have gotten away with hoarding their profits at the expense of the prosperity of our country for too long. Biden is right — it’s time to raise taxes on corporate America.
Morris Pearl is the chair of the Patriotic Millionaires, a former managing director at BlackRock, Inc., and the co-author of Tax the Rich! How Lies, Loopholes, and Lobbyists Make the Rich Even Richer.