President Biden was elected on a promise that he would not raise taxes on people earning less than $400,000. The administration’s recently announced tax hike on “big business” will break this promise in practice, if not under the letter of the law.
Remember, there’s a difference between who owes a tax and who actually bears the costs in reality. This will be important to keep in mind as Biden tries to sell his tax hikes as policies focusing on “the rich.” In order to finance more blowout spending, the president is reportedly planning on raising the corporate tax rate from 21% to 28%.
While this sounds like a proposal that would only hurt corporate bigwigs and CEOs, the economics of corporate taxation clearly show that workers and consumers are the ones who will really pay the price.
“The elementary fact is that ‘business’ does not and cannot pay taxes,” Nobel Prize-winning economist Milton Friedman once explained. “Only people can pay taxes. Corporate officials may sign the check, but the money that they forward to Internal Revenue comes from the corporation’s employees, customers, or stockholders.”
Simply put, corporate taxes don’t really come out of profits. They’re usually passed on via lower wages and higher consumer prices.