Source: Wall Street Journal
With the recent clamor for tax reforms across the United States, the House Democrats have proposed an increase in the statutory corporate tax rate to 26.5% from the current 21%: a move that has led various corporate leaders to believe it to be one of the greatest threats to the American economy.
The Business Roundtable, a large and influential group consisting of prominent corporate leaders, shared that the move may primarily affect the present and future investments, as well as hiring and growth plans in the near future. As a matter of fact, its third-quarter CEO survey showed that chief executives have three primary concerns: difficulty finding and retaining qualified workers, a possible rise in the corporate tax rate, and slow COVID-19 vaccine uptake.
“Increasing taxes on America’s largest job creators by almost $1 trillion—nearly three times the net corporate tax cut from 2017 tax reform—would be one of the largest corporate tax increases in history,” shared Business Roundtable President and CEO Joshua Bolten. “Tax increases on job creators would make it harder for U.S. companies to compete and would hinder investment in America,” he added.
If the corporate tax hike happens, Donatos Pizzeria LLC, a privately-owned company based in Columbus, Ohio, expects to recalibrate its investments in automation and store remodeling, Chief Financial Officer Doug Kourie said in an interview. “Any more taxes we pay is less invested back into the company,” he said. “It would have a real impact.”
The Biden administration and congressional Democrats are currently working on a bill that modernizes and expands U.S. public safety—a bill that is projected to impact a lot of Americans across the country. However, the $3.5 trillion price tag poses a potential setback to the State’s budget, leading Democrats to propose raising the corporate income tax rate to 26.5%. The former President Trump’s 2017 tax legislation lowered the rate to 21% from 35%.
Democrats have also proposed a top individual income tax rate of 39.6% and a 3% surcharge on individual income above $5 million, and a capital gains tax of 25%.
This proposal is expected to improve the American economy by $2.9 trillion, combining the $700 billion raised in revenue and cost savings from Medicare drug price changes. It is also expected to raise an estimated $16 billion by limiting deductions for executive compensations and $96 billion by higher taxes on tobacco and nicotine products, including e-cigarettes. The proposal would also cut in half the $23.4 million estate and gift tax exemption for married filers on December 31, 2021, four years earlier than what was laid out by the previous administration.
Notably, any discussions lifting the $10,000 cap on the state and local tax deduction has not been included in the proposal. This raises questions about the fate of the bill.
“If SALT isn’t included in there and reinstated, it will be hard to get this bill passed,” New Jersey Representative and modern Democrat Josh Gottheimer said in an interview. “Everyone is well aware of that. I know our leadership is aware of that.”