The Biden Plan for Economic Sclerosis

American workers would suffer under his proposal to tax capital and subsidize green energy

By Kevin Hassett. Excerpts:

"When President Trump took office, the U.S. had the highest corporate tax rate in the developed world and had experienced a decade of slow growth, low investment and stagnant employment and real wages. The Obama economy was especially toxic for low-earning and less-educated groups. The assault on business was so widespread that capital’s contribution to economic growth was lower during the Obama expansion than it had been during any other period of growth since World War II."

"High corporate taxes, a regulatory assault and social programs that discourage work and advancement led many U.S. multinational companies to locate their activity and profits overseas. This reduced or eliminated their tax in the U.S. while also reducing their demand for American labor. Wages dropped and tax revenue dropped, a double hit."

"Actual gross domestic product by the end of 2019 was about $300 billion higher than the Congressional Budget Office had projected in July 2017. Business investment was about $100 billion higher and 2.8 million more workers were employed. U.S. firms repatriated $1.4 trillion in cash that was previously stuck overseas. And in the first two years after the tax cuts were passed, real median household income increased $4,900. Employment surged, especially among the long-term unemployed, the poor and minorities. Wealth for the bottom 50% of households advanced three times as fast as for the top 1%."

"Mr. Biden proposes to make the U.S. corporate tax rate among the highest in the developed world again—28%. This looks like a modest increase compared with the 2016 rate of 35%, but it isn’t. The base broadeners that financed the rate reduction in 2017 aren’t being reversed; they’re being enhanced."

"every cent of corporate tax comes from higher prices, lower wages or lower payments to investors. This is accounting fact, not theory. And the evidence suggests that the wage channel is among the most important."

"There has been bipartisan agreement for decades that user fees—and indirect user fees such as gasoline taxes"

"Real-time electronic tolling makes user fees easy to implement. That would reduce congestion, improve the environment and raise plenty of revenue."