The Worst of the Biden Tax Increases

What is the worst of President Biden’s latest proposed tax increases? It’s hard to say. There are many strong candidates. So rather than choose the worst, I’ll choose what I think are the two worst: the increase in the corporate income tax rate from 21 percent to 28 percent and the increased tax rates on capital gains.

Consider first the corporate tax rate. Seventy years ago, economists believed that the burden of the corporate income tax fell largely on corporations. But the increasing globalization of capital in the last 40 years has changed that. Because people can set up corporations in other countries, they have an incentive to choose countries where their income is taxed lightly or even not at all. The late Walter Wriston, former chairman and CEO of Citicorp, put it well: “Capital goes where it’s welcome and stays where it’s well treated.” One main way to treat capital well is not to expropriate it; another is not to tax it heavily.

These are the opening two paragraphs of David R. Henderson, “The Worst of the Biden Tax Increases,” IPI TaxBytes, March  23, 2023.

Also:

Biden also proposes to increase capital gains tax rates. Under the current law, the top federal and state tax rate on capital gains is 29.1 percent, which, the Tax Foundation points out, is already well above the 18.9 percent average for OECD countries excluding the United States. Biden would raise that top rate to a whopping 49.8 percent making it 163 percent higher than the non-US OECD average. That would also discourage investment in capital.

Read the whole thing.