The Harris Plan to Lower Your Wages

The Vice President wants to raise the corporate tax rate from 21% to 28%, which will ultimately be paid by workers

WSJ Editorial. 

"The Democratic team that brought you declining real wages is now threatening to lower your pay again. That’s the practical effect of Kamala Harris’s idea to raise the U.S. corporate tax rate to 28%, and it’s instructive that an anti-growth tax increase is one of the Vice President’s few distinctive policy priorities so far.

Ms. Harris’s endorsement Monday of a 28% rate, up from the current 21%, signs onto what President Biden has been proposing. A Harris campaign spokesperson told the press the idea is “a fiscally responsible way to put money back in the pockets of working people and ensure billionaires and big corporations pay their fair share.”

That statement wouldn’t survive a polygraph on the economics. President Trump and Congressional Republicans in 2017 lowered the corporate rate from 35%, which was among the highest in the world at the time.

U.S. companies during the Obama Administration often moved their headquarters to lower tax climes such as Ireland to avoid the high U.S. tax rate that made them less globally competitive. The Business Roundtable estimates that some $2.5 trillion in income earned abroad returned to the U.S. as a result of Mr. Trump’s 2017 reform.

Ms. Harris pitches her 28% rate as merely punishing big companies, but economists of all stripes agree that U.S. workers pay for higher corporate taxes in lower wages. The corporate rate cut contributed to the strong pre-Covid U.S. economy in 2018 and 2019 with growing wages that many voters say they miss.

The current U.S. corporate rate is above 25% when state corporate taxes are included, and the Harris increase would again make the U.S. a world outlier at above 30%. The OECD statutory average is a little north of 23%, and the European Union’s is lower at roughly 21%, according to the Tax Foundation. The average in Asia? About 19%.

The next President will put his or her mark on America’s global competitiveness when many of the 2017 tax cuts expire in 2025, and on this score voters are getting a clear choice. Mr. Trump has suggested lowering the corporate rate to 15%. He can make this part of a larger theme of faster growth and rising incomes if he explains to voters what Ms. Harris’s tax increase means for average workers."