Budget & Tax
Biden’s coercive tax policies
May 3, 2021
President Joe Biden has proposed to increase the federal corporate tax rate, raising the rate from 21 percent to 28 percent, to help pay for his infrastructure plan. The administration has downplayed the negative impacts this and other proposed tax hikes would have on the economy. However, recent action by the federal government shows it may not be convinced tax increases are indeed harmless.
The Biden administration has called for a global minimum tax rate in hopes that other countries will end the “race to the bottom” in corporate tax rates. It raises the question that if lower taxes are such bad policy, why have other countries continued to lower their corporate tax rates? Since 2000 the average corporate tax rate in Europe fell from 31.6 percent to 21.7 percent. And why, if raising the U.S. corporate rate really would usher in a “new, smarter form of competition,” would other countries need to be forced to follow along?
The same tactic is being used domestically as well. For decades now states like Florida, Texas, and Tennessee have grown at faster rates than the rest of the country while states like California and New York have seen people leave in droves.
Despite the evidence that states with lower tax burdens, specifically low income-tax rates, grow at faster rates than higher tax states, the federal government has put a ban on tax cuts. Any state that accepts the next round of federal bailout money would be barred from using that money to offset any decline in revenue from a tax cut, virtually eliminating the possibility of enacting any form of tax relief.
This sort of heavy-handed, coercive attitude reveals the federal government’s position. As more countries and more states look to become more competitive by lowering their tax rates, the federal government thinks it knows best. Instead of trying to persuade people what the best policy is, they seek to impose it upon them.
We are beginning to learn, as Andrew Stuttaford observed over at National Review Online (“Another Twist of the Knife: Introducing a New Death Tax”), that “one of the characteristics of this administration’s way of doing business is a fondness for coercion.”