“I will raise taxes for anybody making over $400,000,” Biden says over and over. “Let me tell you why I’m going to do it. It’s about time they start paying a fair share of the economic responsibility we have. The very wealthy should pay a fair share, corporations should pay a fair share.”
Income taxes — that thought of soaking the rich — is appealing to many. But how do you define “fair share”?
In 2017, the top 1 percent paid more income taxes than the bottom 90 percent combined. According to the Tax Policy Center, 76.4 million people (44.4 percent) did not pay any federal income tax in 2018. And so the question remains, what do you mean by “fair share?”
Stated another way, the middle 20 percent of earners, with incomes of $50,001 to $87,300, will pay an average federal tax rate of 12.4 percent; according to the Tax Policy Center analysis, that’s less than half the effective tax rate paid by the top 1 percent.
Biden and Harris have said publicly, “We will repeal the Trump tax cut on day one.” And they should add, “and you will all be paying more federal income taxes.”
As for corporate taxes, the Trump tax cuts reduced corporate taxes from 35 percent — highest in the developed world — to 21 percent. “The idea that we have a tax rate for corporate America at 21 percent is ridiculous. It should be 28 percent,” Biden said.
The cost of producing a product consists of raw materials, plant operations, wages, corporate taxes, etc. The point being, corporate tax is just another cost of producing a product. If the corporate tax goes up, the selling price to the consumer goes up. Corporations don’t pay taxes, people pay taxes.
The second consequence of higher corporate taxes is much more serious. If manufacturers cannot compete on price, they move manufacturing overseas for cheap labor. High corporate taxes have sent tens of thousands of manufacturers overseas while others simply went out of business.
On the capital gains tax, Biden says, “So every single solitary person, their capital gains are going to be treated like real income and they are going to pay 40 percent on their capital gains tax.” His plan doubles the current rate of 20 percent.
Capital gains is a double tax. You make money, pay taxes and invest money, which creates jobs and wealth. If you make an investment profit, the feds tax you again.
Wealthy folks obviously do not put their money under their mattress. They invest it. They risk it. When the investment is successful, they make more money and invest more. Capital is the fuel for capitalism.
What else is coming out of Joe’s basement? Let’s look at estate taxes. The most despicable tax of all, it is currently taxed at 40 percent of estate value above $11.6 million. Biden would lower the exemption to $3.5 million and raise the tax rate to 77 percent.
On the payroll tax, a 12.4 percent Social Security tax split between workers and employers currently comes off after $137,700 of income. Under Biden’s plan, there would be no shutoff limit.
And on the corporate minimum tax, Biden will put a 15 percent minimum tax on income of businesses with $100 million in profits. That would be another corporate tax passed on to the consumer.
A final thought about wealthy folks. Because they have means, they have options. When California over-taxed the rich, there was only 42 percent of the expected revenue gains from the tax hike because the rich had moved away. New York’s wealthy are departing in droves. Governor Cuomo points out that “a single percent of New York’s population pays half of the state’s taxes and they’re the most mobile people on the globe.” Correct.
Democrats need to research what happened in France when taxes on the wealthy became unrealistically high. From 2000 to 2014, 42,000 French millionaires departed.
The long-suffering Democrats’ economic policy of tax-and-spend simply does not — and cannot — grow an economy. Economic policy and taxation must be about growing the economy. When the economy grows, everyone wins.
Here is what is coming from Biden/Harris. The bottom 45 percent will pay no income taxes. The wealthy will be taxed until they and/or their money depart. The middle class will be taxed like never before to raise the tens of trillions of dollars for the programs in the Democrats’ campaign platform.
I am a soldier, not a tax expert. But there are some very smart folks in the following organizations who have come to the same conclusions: The Tax Foundation, American Enterprise Institute, Tax Policy Center, Committee for a Responsible Federal Budget, and Wharton Business School. All come to the same conclusion that Biden’s plans will increase taxes across the board.
Biden spent eight years in the White House with a tax-and-spend, no-growth economy. Why does he want to take us back there?
Lt. Gen. Marvin Covault, U.S. Army (ret.), is the author of “Vision to Execution,” a book for leaders.