President Biden revealed in March his plan for America’s fiscal future in his 2024 presidential budget. In it, he outlines a broad policy agenda, including a plan to raise the corporate tax rate from 21 percent to 28 percent and levy a litany of taxes on high-income earners.
Yet, his proposal would do nothing to address the country’s national debt crisis. Biden plans to increase spending by $1.1 trillion, a large proportion of which would be for non-military discretionary items like expanding the federal child tax credits, tuition reduction, clean energy infrastructure, and biomedical and environmental research.
When first proposed, raising the corporate tax rate was estimated to cut America’s Gross Domestic Product by $720 billion over 10 years. It would also reduce workers’ wages and full-time employment opportunities.
While the president appears focused on increasing the tax burden on wealthy Americans, he should be concerned with prioritizing policies that elevate Americans’ purchasing power and doing so as quickly as humanly possible.
Raising corporate taxes will drive high-income workers to low-tax jurisdictions, pushing consumer prices up. It is well documented that when the government seeks to discourage a behavior, it chooses to tax it. Taxing U.S. investments signals to investors that their financial backing is not wanted. Meanwhile, those who cannot bankroll economies abroad are left to do more with less.
But most important, these changes signal higher consumer prices through reduced investment in American business.
Consumers are struggling. A January 2024 poll reveals that 31 percent of Americans rate national economic conditions as “poor” while 41 percent rate them as “only fair.” The same poll also reveals that 72 percent of Americans are “very concerned” about the price of food and consumer goods.
These attitudes are reflected in economic reality. In the past year, there has been a 2.2 percent increase in food costs and a 3.6 percent increase in electricity prices, while hourly earnings are up only 1.1 percent. In fact, Stephen Miran, an adjunct fellow at the Manhattan Institute and a former senior adviser for the Treasury, stated that “inflation-adjusted wages shrunk by 3.7 percent since the end of 2022.”
The president and his economic advisers likely saw a political opportunity to present a budget that caved to the worst impulses of economic populism before the November 2024 election. It is easy to see this plan as more political rhetoric than any genuine attempt at a policy prescription about America’s fiscal future.
Fortunately, Congress almost never follows the president’s budget. It does, however, signal another missed opportunity for the administration to spread confidence in the economy and unleash the full, unrivaled economic potential of private enterprise in America.
Reprinted with permission from DC Journal by Ben Dennehy.
The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.