White House Press Secretary Jen Psaki was asked on MSNBC LIVE if businesses would raise prices if the Biden Administration raised their taxes. The host of the show, Hallie Jackson, said, “Of course, (Biden) could only do so much if corporations end up raising prices on things if they end up having a tax hike as well, right?”
Jen Psaki’s response was:
“(Joe Biden) also believes that the American people are smart. They’re invested in this. They’re going to pay attention and that they know that corporations do not need to raise the cost of goods in order to pay more taxes and pay more of their fair share.”
What you have to ask at this point is, “Is Jen Psaki lying to people she thinks won’t know better or does she not understand basic economics?” Contrary to what political lifers like Jen Psaki and Joe Biden may think, business owners typically don’t have huge piles of money labeled “Unneeded cash” sitting around. When you force a business to pay higher costs, most businesses need to find a way to account for those costs in some form or fashion. They may do that by reducing wages or firing employees. In other cases, they will pass those costs on to consumers. What those businesses are not typically going to say is, “Gee, I guess the parasites in government living off of me are right and I’m not paying my fair share.”
That’s not just opinion either. As Matt Palumbo wrote, summarizing a handful of studies on corporate taxes:
- A review of the academic literature on the corporate tax conducted by the U.S Department of the Treasury found that, “labor may bear a substantial portion of the burden from the corporate income tax.”
- Economist Arnold C. Harberger, known for authoring a seminal paper on the effects of the corporate income tax rate on international trade, has found that labor bears over 80% of the corporate tax.
- According to Oxford University economist Li Liu and Rutgers economist Rosanne Altshuler, for every $1 increase in corporate tax revenue, wages decrease by 60 cents.
- Wiji Arulampalam, Michael P. Devereux, and Giorgia Maffini of Oxford University found that $1 in additional corporate tax reduces wages by 92 cents in the long run.
- According to economist Alison Fenix, “a one percentage point increase in the marginal corporate tax rate decreases annual wages by 0.7 percent.”
It’s also worth noting that Joe Biden wants to raise the corporate tax rate from 21% to 28% even though the average corporate tax rate in Europe is 19.35% and some nations, like Ireland, only have a 12.5% rate. If you owned a corporation, would you rather be headquartered in Ireland and paying a 12.5% corporate tax or in the United States paying 28%? In a world where corporations often sell products and have divisions all over the planet, pushing for the highest corporate tax rate in the Western world is foolish.
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