It’s the general consensus of economists that companies tend to pass on increases in taxes to their customers as well as their employees, in the form of lower wages.
But the White House insists its intent to raise the corporate tax rate won’t have any effect on America’s middle class.
Biden’s press secretary, Jen Psaki, said in an interview Thursday with “MSNBC Live” that the president “believes that the American people are smart.”
“They’re invested in this,” she told the network’s Hallie Jackson. “They’re going to pay attention and that they know that corporations do not need to raise the cost of goods in order to pay more taxes and pay more of their fair share.”
Psaki was speaking to Hallie Jackson of “MSNBC Live” in an interview that aired Thursday, Breitbart News reported.
The White House spokeswoman insisted that, as Biden promised on the campaign trail, people making below $400,000 would not see any increase in their taxes
“[Biden] believes people should pay their fair share, and that includes corporations, and that’s a way that we can help fund some of the really important programs that will help create more jobs, help in innovations,” she said.
Shouldering the burden
Under President Trump, the 2017 tax law lowered the corporate tax rate from 35% to 21%. Biden is said to be considering an increase to 28%.
An analysis by the libertarian CATO Institute found that about 31% of the total incidence of corporate taxation falls on consumers through higher product prices.
Capital owners bear a similar amount as do workers, through lower wages.
Michael Strain, a financial columnist for Bloomberg News, says economists agree that when corporate rates go up, the incomes of the middle class are reduced.
“Tempting though it is to wish that faceless entities like corporations would shoulder the burden, sparing individuals the pain, in reality corporate taxes are always financed by people,” he said. “The only question is which ones.”
He noted that economists formerly believed the burden of corporate taxation fell almost entirely on the owners of capital in the form of lower share prices or smaller dividend checks. But that view became outdated, he said, as it became easier for capital to cross national borders.
“Workers, by contrast, are much less internationally mobile. This leaves them more vulnerable when business owners are forced to pony up higher taxes on their business income,” he wrote.
“A higher corporate rate lowers the after-tax return on additional investment. Less investment makes workers less productive, which in turn makes them less valuable. If workers are less valuable, then businesses will reduce efforts to attract and retain them, putting downward pressure on starting salaries and restraining wage growth,” he explained.
Strain noted the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution, assigns 20% of the burden of the corporate tax to workers in its economic models.
The nonpartisan Congressional Budget Office concludes that workers bear 25% of the tax’s burden.