As a former Democratic US Senator, I believe in Joe Biden. But I also believe his plan to raise corporate taxes will hurt the US economy when it needs help the most
- I believe Joe Biden will help heal our nation, and I endorsed him for president earlier this year.
- However, I have concerns about the Democratic party's plan to raise the corporate tax rate to 28%.
- This will only put more pressure on our economy. Instead, keeping the tax rate competitive will ensure that companies can bounce back in recovery.
- Blanche Lincoln is a former Democratic senator from Arkansas.
- This is an opinion column. The thoughts expressed are those of the author.
- Visit Business Insider's homepage for more stories.
Back in March, I was proud to endorse my friend and former Senate colleague Joe Biden for President of the United States. Joe — as I noted at the time and still wholeheartedly believe today — is a proven and tested leader who can help heal and unite our nation, as well as make real progress for hardworking families. This belief was only strengthened the week after my endorsement when the coronavirus pandemic "seemed to crystallize in the national consciousness," and our economy was once again thrown into a precarious state.
Like so many Americans during this difficult time, I am inspired by President-elect Biden's bold vision to Build America Back Better. And as a former Senator and Senate Finance Committee member, who served during one of the greatest economic expansions in American history and one of the gravest contractions, I believe Joe has what it takes to lead us out of our current economic catastrophe.
With this background and experience, I have some concern about one particular provision found in the 2020 Democratic Party Platform. One that pushes for higher taxes on job-creating businesses in the throes of the steepest recession since World War II.
Raising taxes in the midst of economic turmoil would only serve to keep the economy down. Instead, Democrats — led by Biden — should heed the lessons of our history and keep our country's tax system competitive.
Democrats should learn from history
Now that Democrats have made history in 2020, we must also remember to turn to this history in 2021. While this particular pandemic is without parallel, our party already has a well-refined road map to revitalize America in the aftermath of a recession. Raising taxes on businesses either during or on the heels of an economic downturn, as some prominent progressives have previously warned against, would instead serve as a roadblock for recovery.
In 2009, for instance, President Barack Obama shrewdly remarked that "the last thing you want to do is raise taxes in the middle of a recession because that would just suck up – take more demand out of the economy and put business further in a hole." The following year, former Senate colleagues of mine, including Kent Conrad, Evan Bayh, Joe Lieberman – as well as dozens of House Democrats – issued similar statements about a tax hike's capacity to compound a recession rather than help us crawl out of one.
In addition to these concerns about the timing of a tax hike on America's job creators, legions of liberal leaders and legislators – including President Obama, Speaker Nancy Pelosi, and Senator Chuck Schumer – have also cautioned about the concept in general. Indeed, all of these Democratic leaders noted the need for a corporate tax code that unleashes rather than undermines American competitiveness.
As President Obama perfectly articulated both prior to and during his presidency – when our country's business rate was the highest in the industrialized world and a full fifteen percentage points above the OECD average – corporate tax reform should consist of two critical components: cutting the statutory rate to a competitive level and closing wasteful loopholes that permit certain companies to pay nothing. Keeping corporate rates competitive and predictable will help companies grow back better and faster.
Statistics that stem from the recent achievement of a globally competitive corporate tax system – a system that finally reflects the reality of today's globalized marketplace – underscore precisely why it was and should remain a bipartisan priority.
Creating a stronger recover
Prior to the pandemic, our economy was far from perfect – there is much more we need to do to promote greater economic equality and inclusion. That said, our country's unemployment rate consistently remained below 4%, the economy created more than 100,000 private sector jobs per month, and nominal wage growth was either at or above 3%growth for nearly two straight years. Meaningful economic wins traditionally regarded as rare suddenly became routine. And corporate America itself was elevating the critical issues of environmental and social justice.
Such tremendous success, meanwhile, was certainly not limited to the macro level as tax reform savings flowed into bank accounts of workers through bonuses, increased benefits, bigger paychecks, and lower utility bills.
In total, 2017's tax reform generated "1,200 examples of pay raises, charitable donations, special bonuses, 401(k) match hikes, increased company funding of defined benefits plans, business expansions, benefit increases, and utility rate reductions" for millions upon millions of Americans in Arkansas and all 50 states.
Consequently, reversing one of the core catalysts responsible for such remarkable economic growth would be the wrong approach at the worst time. The 28% corporate tax rate proposed in the Democratic platform, which would increase to over 32% once sub-national tax burdens are factored in, would push our effective corporate tax rate near the highest in the world.
As a direct result, it would put US businesses and workers at a competitive disadvantage, send American jobs abroad, and funnel investment in our country to foreign competitors that offer more favorable structures, such as China – whose 25% rate undercuts our current one when the foregoing state and local burden percent is factored in. And overall, the average corporate tax rate among the 37 countries that comprise the OECD is 23.59%– clearly below the U.S. combined rate of over 25%.
Rather than raising taxes on the very domestic companies that can help drive America's economic recovery out of this recession, our approach should seek to close the types of loopholes that President Obama lamented. Rather than encumbering companies that are struggling from this pandemic – and worse still, incentivizing the relocation of their operations and opportunities overseas – our approach should seek to ensure that no company can evade the tax rate already on the books.
As they race to reduce their rates – France, for instance, is scheduled to trim down its rate to 25% by 2022 – America's global competitors recognize this reality and remain hopeful that they can once again be the greatest beneficiaries of our country's tax code.
Accordingly, Democrats must once again recognize that a competitive corporate tax rate is among the most effective tools at our country's disposal to reignite the economy and create jobs. Democrats must refrain from revising the code in such a way that leaves many job creators paying more – and lets other companies continue to contribute nothing.
Following a season of fierce political division, it is time to come together in a spirit of bipartisanship to close loopholes, keep American jobs and Build America Back Better.
This is an opinion column. The thoughts expressed are those of the author(s).
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