President Joe Biden’s effort to sell Americans on the largest tax increase in U.S. history has been further undermined by the facts.
The heart of the 46th president’s argument for his proposed $3.5 trillion so-called human infrastructure legislation has been that the nation can afford it — because the “wealthy” and corporations are not currently paying their “fair share” in taxes.
Pres. Biden to corporations: ‘All I’m asking is you pay your fair share…just like middle-class folks do.’ pic.twitter.com/zmha8ZXuoM
— NowThis (@nowthisnews) September 16, 2021
Former GOP Sen. Phil Gramm of Texas, now a fellow with the American Enterprise Institute, and Mike Solon, a partner with U.S. Policy Metrics, shot many holes in Biden’s position by pointing out a few stubborn facts in an article for The Wall Street Journal last week.
“Organization for Economic Cooperation and Development data show that the top 10% of American households earn about 33.5% of all earned income but pay 45.1% of all income taxes, including Social Security and Medicare payroll taxes,” the two noted.
“In the last OECD study, in 2015, the top 10% of earners in the U.S. paid 45% of all income taxes. In France, the top 10% only paid 28%. In Germany they paid 31% and in Sweden 27%. Conversely, the bottom 90% of earners in the U.S. paid 55%. The bottom 90% of earners in France paid 72%. In Germany it was 69% and in Sweden 73%,” they added.
In other words, the tax burden to fund the generous welfare benefits in places like France, Germany and Sweden is more evenly distributed among the populations of those countries.
Gramm and Solon, pointed out the 2017 Tax Cuts and Jobs Act actually shifted more of a percentage of the tax burden onto the wealthy.
“The Joint Committee on Taxation and the Congressional Budget Office found that the 2017 tax cuts made the American tax system more progressive and, according to the [Congressional Budget Office], the ‘highest quintile’s share of federal taxes was 0.5 percentage points higher in 2018 than in 2017,'” Gramm and Solon wrote.
“Comparing total federal, state and local taxes with total income including government transfer payments in 2017, the bottom quintile of income earners in the U.S. paid 7.5% of their total income in taxes. The second quintile paid 14.1%, the middle quintile paid 22.7%, the fourth quintile paid 28.4%, and the top quintile paid 35.2%.”
President Biden’s effort to pass the largest tax increase in U.S. history is based on the verifiably false claim that Americans with high incomes don’t pay their “fair share.” @AEI‘s Phil Gramm and Mike Solon in @WSJopinion: https://t.co/POxo8TvuJJ
— AEI Economics (@AEIecon) October 18, 2021
“Not surprisingly, with much of the 2017 tax cuts made up of corporate rate reductions, child tax credits and a doubling of the standard deduction, the Trump tax cuts made the tax code more, not less, progressive,” the writers concluded.
The CBO released initial estimates last week showing that the tax cuts, signed into law by former President Donald Trump, worked as advertised — with revenues to the federal Treasury in fiscal year 2021 topping $4 trillion for the first time in U.S. history.
Trump Tax Cuts Worked As Advertised: Tax Revenues Top $4 Trillion in ’21, An All-Time High https://t.co/dJbMRdFLYg
— Tea Party Patriots (@TPPatriots) October 15, 2021
As was true following tax rate cuts under former presidents Ronald Reagan and John Kennedy, revenues increased because of greater economic activity: They grew the pie, so to speak, of the U.S. economy and thereby the base from which to tax.
Likely even more painful for Biden and his team to learn, the largest percentage increase in revenue came from corporate taxes, which were up to $370 billion, an increase of 75 percent from 2020 to 2021, matching the record high of 2007, according to the nonpartisan Tax Foundation.
“In fact, corporate tax collections this year are about 25 percent higher than the $297 billion collected in 2017, prior to passage of [Tax Cuts and Jobs Act]. Likewise, as a share of GDP, corporate tax collections are higher this year (1.63 percent) than in 2017 (1.52 percent),” the Tax Foundation said.
The Trump tax cuts brought the federal corporate tax rate down from 35 percent — then the highest in the industrialized world — to 21 percent. The Republicans wanted America to be competitive again on the world stage.
— Tax Foundation (@TaxFoundation) September 22, 2021
Left-leaning Politico noted that the latest revenue numbers throw a wrench in Biden’s talking point that the rich and corporate America aren’t paying the taxes they should.
“Though Democrats are hammering the rich for not paying their fair share in taxes, the increase is being driven by levies primarily paid by the well-to-do,” the news outlet reported.
So contrary to Biden’s claims, the wealthy are paying taxes, and the best thing he could do to keep revenues high is to ditch the proposed tax increases — and the entire $3.5 trillion reconciliation bill while he is at it.