Biden’s Corporate Tax Hike Could Eliminate Millions of US Jobs

Although Biden’s proposed ambitious corporate tax plans will increase government revenue and reduce the incentive for corporate evasion havens, they could simultaneously kill millions of American jobs and significantly reduce GDP levels.

According to a recent study conducted by Rice University economists for the US National Association of Manufacturers, the US stands to lose about one million jobs by 2023 if it raises the corporate tax rate from the current 21% to the proposed 28%. The average annual decline in the country’s employment would be equal to the loss of approximately 600,000 jobs annually over a span of 10 years.

Moreover, the economists calculated that under the new tax plan, global domestic product would drop by $117 billion by 2023, followed by a further decline of $190 billion and $119 billion in 2026 and 2031, respectively. Similarly, investments in equipment and structures, or ordinary capital, would be $80 billion lower in 2023, $83 billion lower in 2026, and then reduced by another $66 billion by 2031.

As per the Biden administration’s proposed plan, which was announced by the US Treasury Department, America’s corporate tax rate would be hiked to 28%, after Former US President Donald Trump slashed the rate from 35% to 21%. The Biden administration said the increase would bring the US corporate tax rate closer to that of other advanced economies, while simultaneously reducing inequality.

Aside from increasing the corporate tax rate, the Biden administration also proposes overhauling several key international provisions that were part of Trump’s tax cuts. One of the more significant changes would be raising the global minimum tax rate to 21%, in order to curb corporate evasion havens. So far, the proposal has received support from Germany and France, as well as Italy’s prime minister Mario Draghi, who is slated to chair the G20 in 2021. Going forward, the countries are expected to come to an agreement on corporate tax reform via the Organization for Economic Cooperation and Development ahead of the July G20 summit.

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