Most of what Mr. Glenn Hamer says about how President Biden’s Build Back Better program is intellectually dishonest nonsense. Raising the corporate tax rate will not hurt manufacturing or cost workers their jobs.
We have had far higher corporate rates and our economy has performed very well with corporations enjoying solid after tax profits, and the nation enjoying economic growth, rising wages and a rising standard of living.
Throughout the 1950’s and well into the 1960’s, corporate taxes ranged from 48% to 52%. During that time, our economy functioned very well; far better than it has functioned over the past 40 years because economic rewards (income) were distributed far more equitably throughout the population.
In both eras, there were recessions, but the recessions through the 50’s and 60’s tended to be shorter, no more than 11 months (1949 & 1969). Those since 1980 have tended to be longer, lasting 1 year and 4 months in 1981-1982, and 1 year and six months in the 2007 “Great Recession”.
Low corporate tax rates probably don’t cause recessions, but they well may hinder economic recovery and help to lengthen them.
Today’s corporate tax rate is a relatively low 21%. And the proposed 28% is neither “drastic” nor “whopping” by any honest measure, and would NOT be “the highest corporate income tax rate in the industrialized world”. Mr. Hamer either is profoundly ignorant of the history of the corporate income tax and the current corporate tax rates of other nations, or he is profoundly intellectually dishonest.
Currently, at 21% the U.S. has a lower corporate tax than 16 developed/industrialized nations. The three highest corporate tax rates among developed nations are Japan (30.62%), Australia (30%) and Germany (30%). Thus, a corporate tax rate to 28%, which still would be lower than the rates of those three developed nations; but, as Mr. Hamer notes, higher than China’s 25%.
However, the problem with his “analysis” goes beyond this, because his “analysis” ignores the hundreds of thousands, quite possibly millions of jobs that will be created with President Biden’s $350 billion a year over ten years Build Back Better legislation and the $120 billion a year over ten years infrastructure bill, and the tax revenue those jobs will create.
Given the U.S. history of economic growth and a stable economy under much higher corporate tax rates, there is no reason to believe increasing the corporate tax rate to 28% will have a detrimental effect on the economy, including manufacturing.
Indeed, the real culprit to U.S. manufacturing decline are the neoliberal “free trade” policies Mr. Hammer probably supports that encourage U.S. manufacturers to close factories in the U.S. and move them to low wage nations. One of the things President Biden wants to do with his Build Back Better program is bring those manufacturing jobs back to the U.S. by taking away inducements for corporations to move them abroad.
Another intellectually dishonest aspect of Mr. Hamer’s “analysis” is the implication that $3.5 trillion will be spent over one year. No, this is a 10 year program with, on average, $350 billion spent each year. In fairness to Mr. Hamer, the media routinely also implies the $3.5 trillion will be spent over one year.
Other important considerations include:
- The fact no corporation will pay the proposed maximum 28% rate because of deductions they are allowed to make, such as depreciation on equipment.
- Perhaps more importantly, numerous hugely profitable corporations pay ZERO corporate taxes today–Amazon as one glaring example. It is beyond imperative that loopholes in the tax code be closed so ALL corporations are paying corporate taxes.
- If we think $350 billion a year over 10 years is a lot of money, consider the military budget, which is over $1 trillion a year. If Mr. Hamer is concerned about tax rates for corporations, one way to hold those tax rates down would be to decrease military spending. Currently, total U.S. military spending is about 1/2 of total world military spending. Does the U.S. really need to be spending as much on the military as the rest of the world combined?
- There are other provisions in President Biden’s proposal to help pay for his infrastructure and Build Back Better program, and that is increasing taxes on the rich–something else Mr. Hamer no doubt opposes. Yet, as Warren Buffett has had the integrity to point out, he and many (most?) other billionaires pay a smaller percentage of their income in taxes than does the average citizen. Perhaps if we taxed the rich more fairly, we would not need to raise corporate taxes as much.
The REAL “bottom line” is corporations are immensely profitable, and the nation’s wealth increasingly is being concentrated in the hands of those whose wealth comes from corporations. The very best way to reduce the growing wealth inequalities in our nations is through increasing taxes—both corporate income taxes and taxes on the rich.
Of course, when one’s objective, as Mr. Hamer’s probably is, is to make the rich richer and leave the scraps to everyone else, well, the truth and factual analysis are to be dispensed with.
Editor’s Note: The above guest column was penned by Rio Grande Valley-based writer and academic Samuel Freeman (pictured above). The column appears in The Rio Grande Guardian with the permission of the author. Freeman can be reached by email via [email protected].
Editor’s Note: The guest column Samuel Freeman was responding to was penned by Glenn Hamer, president & CEO of the Texas Association of Business, an affiliate of the National Association of Manufacturers. The column, titled “$3.5 trillion reconciliation package will hurt U.S. manufacturers”, appeared exclusively in The Rio Grande Guardian. Click here to read the column.
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