A s millions of Americans file taxes this week, frustrated at sending thousands of hard-earned dollars to Washington while struggling to make ends meet because of the inflation crisis that Washington created, they will turn on the news and see Washington handing out billions of their tax dollars to President Biden’s special-interest allies like the electric-vehicle industry. It should come as no surprise, then, that many are drawn to calls demanding that corporations and the wealthy pay more in taxes. This class-warfare drum was once beat almost exclusively by progressives such as Joe Biden and Bernie Sanders, but today, some Republicans see political purchase in it as well. They could not be more wrong on the merits of the proposals, their understanding of the existing tax burden, or their interpretation of Americans’ frustration.
While President Biden campaigns on demanding that corporations pay more, he has rigged the system more than ever for the well-connected. New analysis from Chris Edwards of the Cato Institute shows that Biden has increased corporate-tax expenditures by an incredible 92 percent — to $209 billion — “the biggest gusher of corporate welfare ever.” At the same time, he has proposed raising the corporate-tax rate for everyone else. Biden’s message is clear: Support our agenda and we’ll help you — or else.
That is, of course, a disturbing and unfair way to govern. It also harms the American people by incentivizing businesses to invest in currying favor with politicians rather than innovating, expanding, and increasing productivity, which drive job creation and wage growth.
Unfortunately, while all Republicans have decried Bidenomics, a few are concurrently seeking to emulate it. Senator J. D. Vance (R., Ohio) has previously called to raise the taxes of corporations whose politics he disapproves of, and he just recently teamed up with far-left progressive Senator Sheldon Whitehouse (D., R.I.) to propose a tax hike on corporations that make a business decision the pair dislikes.
Their colleague Senator Marco Rubio (R., Fla.) is championing industrial policy, which by definition involves the government picking winners and losers for subsidies, tax carve-outs, and other favors based on the preferences of whoever is in charge — exactly as Bidenomics does. As the Wall Street Journal editorial board put it recently, “industrial policy sounds nice when it’s sold as patriotic nationalism, but it typically ends in special-interest pleading with business answering to politicians.”
Fortunately, these advocates for more government intervention in the economy are a tiny minority of congressional Republicans. Most of their colleagues understand that what America needs isn’t more politicians from either party exacting revenge on their enemies through the tax code but low taxes across the board to facilitate economic growth. Republicans’ 2017 Tax Cuts and Jobs Act (TCJA) accomplished this, and Congress should build on its progress, not reverse it.
The same is true on the individual side, where TCJA cut rates and put more money in the pockets of the vast majority of Americans. House Republicans have voted to extend these tax cuts, but Democrats have adamantly opposed TCJA since the beginning. President Biden in his State of the Union address railed against wealthy individuals not paying their “fair share” and proposed a massive individual-tax hike, which allegedly earned applause from two Republican senators.
That sentiment should also remain in a tiny minority of Republicans, because it is completely detached from reality. New analysis from the Tax Foundation of the most recent IRS tax data, from 2021, finds that the tax code is already extremely progressive and getting worse. Contrary to Biden’s claim, the wealthy pay far more than their “fair share.”
The much maligned top 1 percent of earners paid 46 percent of all federal income tax, nearly double their share of the nation’s income. The top 5 percent of earners paid 66 percent of all federal income tax, also far in excess of their share of income. In 2001, the bottom 90 percent of taxpayers paid about 36 percent of the federal income tax. In 2021, that figure had dropped to less than 25 percent, and nearly half of filers paid no federal income tax at all. That is neither fair nor sustainable.
It should come as no surprise, then, that many Americans like the idea of receiving more from the government if they aren’t primarily the ones paying for it. But politicians like Joe Biden who are clamoring for wealth redistribution through the tax code never tell Americans the truth: Even taxing millionaires out of existence and taking every dime of wealth away from America’s billionaires would not come remotely close to paying for promised giveaways.
More importantly, it would deprive Americans of what they truly desire — the dignity of earned success — because of the immeasurably harmful impacts such confiscatory taxation would have on economic growth, job opportunities, and wages.
Americans are rightfully frustrated with many of society’s major institutions. But the path to fixing them doesn’t lie in forking over more money and control to Washington politicians and bureaucrats like Bidenomics does. This Tax Day, Republicans would do well to remember that, no matter what you call it.