Biden’s confiscatory tax plans unleash class warfare

In his latest economic policy proposals, President BidenJoe BidenHouse Judiciary Democrats call on DOJ to reverse decision on Trump defense Democratic super PAC targets Youngkin over voting rights Harris dubs first foreign trip a success amid criticism over border MORE has laid out a wish list of tax increases to help pay for his administration’s proposed massive spending increases. His rhetoric, which accuses “corporate America and the wealthiest 1 percent of Americans” of not paying their “fair share,” is a well-worn page from the class warfare playbook. Unfortunately, it perpetuates many misconceptions about the U.S. tax system and ignores the extreme negative effect that these tax hikes would have on investment, work and wages. 

First, a fundamental misrepresentation in Biden’s argument is the claim that the wealthy are paying an unfairly low share of taxes into the system. This kind of statement simply preys on people who feel like it would be a good idea to soak the rich or who merely think the wealthy are able to avoid taxation, but are unaware of the basic facts.  

In 2018, the latest year for which complete IRS data are available, the top 1 percent of taxpayers earned 21 percent of total (adjusted gross) income in the economy, but they paid over 40 percent of total federal income taxes. The top 10 percent earned 47 percent of income, but paid 71 percent of taxes. Calls to make the individual tax code even more progressive are calls on higher-earning families to bear an even more disproportionate share of the tax burden than they already do, not to merely pay as much as everyone else. 

Second, by disparately proposing a tax increase here and another there, Biden leaves taxpayers themselves to do the math, but avoids disclosing the total tax burden he is trying to impose.  

For corporations, the assorted Biden tax increases would compound, significantly increasing their effect. In general, publicly traded and other large companies, which are sometimes the most economically efficient manner of doing business, are C corporations subject to two levels of tax.    

Biden would increase the corporate tax rate from 21 percent to 28 percent and the tax rate on dividends and capital gains from 23.8 percent to 43.4 percent. The Tax Cuts and Jobs Act (TCJA) in 2017 brought the corporate income tax rate down from 35 percent to 21 percent, which is about average amongst other advanced economies. But the owners of C corporations are subject to a second level of taxation on dividend distributions or sale of stock, which is now 23.8 percent after taking into account tax increases under President Obama that were left in place by the TCJA.  Even under the TCJA, owners of corporations are subject to a combined income tax rate of 40 percent, contrary to claims that wealthy owners of corporations are now barely taxed.  

Here is how corporate double taxation works. Suppose a company earns $100. The company under the Biden plan would pay $28 in corporate tax, leaving the company $72. But to actually obtain that profit, a shareholder under the Biden plan would have to pay an additional 43.4 percent of that $72 upon taking a dividend or…

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