Corporations had ample warning—an entire presidential campaign—that tax increases were coming. But that doesn’t take the sting out of President Biden’s proposal to raise the corporate tax rate to 28% from 21%, The Wall Street Journal reports.
A tax increase, which would take effect as early as January 2022, would cut into corporate profits as the economy recovers, and the Biden plan could reduce the earnings of companies in the S&P 500 by at least 10%, says accounting analyst Dave Zion of the Zion Research Group.
Republican lawmakers have already signaled they won’t support the increase and resistance from moderate Democrats might make a hike to a 25% rate more realistic than 28%, Washington policy analysts say.
The U.S. corporate tax rate was 35% before the 2017 tax overhaul. However, many companies pay a far lower effective rate because of various deductions and credits.
The companies that benefited most from the 2017 overhaul would see the sharpest increase in their tax bills under Biden’s plan. That includes utilities, regional banks, many retailers and other companies that sell goods and services primarily in the U.S.
Critics warn that Biden’s plan to raise the tax rate would hurt U.S. companies’ ability to compete globally, a core driving idea behind 2017’s corporate rate cut, and would likely slow the economy’s pandemic rebound.
Supporters of the increase say that domestic companies and American workers stand to benefit from the Biden administration’s proposal to spend more than $2 trillion on infrastructure and other improvements, says Matt Gardner, a senior fellow at the progressive Institute on Taxation and Economic Policy. Read the full story.