Qwick Takes: The Biden tax hike plan
This week, Talking Biz News Deputy Editor Erica Thompson reached out to Qwoted’s community of experts to inquire about the Biden Administration’s plans to hike corporate taxes to fund its infrastructure and job creation plans.
Check out some of the top commentary:
Bruce Hyde, Partner, Chief Compliance Officer at Round Table Wealth Management:
The recent Covid rescue plan and the infrastructure spending program will cost nearly $5 trillion. Increased taxes on individuals and corporations will be needed to fund these programs. The Biden administration’s proposed tax changes on corporations will be manyfold, including an increase in the top corporate rate from the current 21% to 28%. If companies are not able to pass along this higher tax cost in their pricing, it is likely they will look to other ways to maintain their operating margins (and thus their stock price) such as technology enhancements or perhaps reducing workforce. Companies who operate overseas and enjoy tax benefits will see a larger tax bill as loopholes get closed. They too will need to decide the best way to maintain margins. Workforce reductions are typically the first way to reduce costs.
Mike Savage, Founder & CEO of 1-800-Accountant:
Multiple governments levy so many taxes on businesses that “taxes” is the highest budget items on the ledger sheets of most businesses. These taxes take away some of the money otherwise used to pay wages. So employers can’t pay good wages. Businesses have to raise prices to get money to pay these taxes. So product prices go up. This leads to inflation. These taxes take away money otherwise used to improve quality. Instead, businesses must cut corners to make the products and pay the high taxes. Many recalls are the result of businesses cutting too many corners, to save money so they can pay the high taxes.
Because high taxes cost businesses more, they can’t provide as many products as they used to be able to. Property taxes make it expensive to stock products with lower quantities demanded and manufacturers can’t afford to produce the low-demand products and also pay their taxes. The result is that people with allergies to mainstream products can’t buy any products they can use.
Richard Lavina, CEO, Co-Founder at Taxfyle:
Higher taxes could have the adverse effect of pushing corporations to send their dollars elsewhere into jurisdictions with more favorable tax rates. The global corporate tax rate proposal by Janet Yellen could mitigate this effect, but the implementation of a global corporate tax rate floor would be a complicated process with much deliberation. The last time this happened, the government offered a repatriation holiday whereby corporations could bring back their foreign earnings and reinvest them domestically – effectively letting corporations have their cake and eat it too. What’s the point of missing out on all that reinvestment in the short term?