How a Higher Corporate Tax Rate Would Impact the Average Consumer

The Tax Foundation’s recent reports highlight significant concerns regarding the proposed increase of the U.S. corporate tax rate to 28%, backed by Vice President Kamala Harris and congressional Democrats. Here are the key points from their findings:

Impact on Workers and Families:

1. Wage Reductions: The proposed tax increase is projected to reduce average wages by approximately $600 per worker annually. In some states, this loss could exceed $700 per year, contributing to a total nationwide wage loss of up to $81 billion annually.
2. Long-Term Financial Effects: Over the next decade, these wage reductions could amount to nearly $1 trillion in lost wages for American workers.
3. Higher Consumer Prices: Raising the corporate tax rate would likely lead to higher prices for goods and services, squeezing household budgets further. Research indicates that as much as 50% of the corporate tax burden could fall on consumers, increasing living costs.
4. Impact on Retirement Savings: The higher corporate tax rate could adversely affect investment returns, particularly for the 61% of Americans who own stocks mainly through retirement accounts. This could result in diminished returns and reduced retirement savings for average households.

Broader Economic Implications:

• The Tax Foundation argues that the burden of the corporate tax ultimately falls on workers and consumers, rather than solely on corporations. This contradicts the narrative that only the wealthy and big businesses would be affected.
• The organization emphasizes that raising the corporate tax rate to 28% would be a “costly mistake,” predicting fewer jobs and lower wages across the economy.

Conclusion:

The Tax Foundation’s analysis suggests that increasing the corporate tax rate may not achieve its intended goal of benefitting middle-class families.

Instead, it warns that the consequences could ripple through the economy, harming workers’ wages, increasing consumer prices, and negatively impacting retirement savings. Policymakers may need to reconsider the implications of such tax changes on the average American.

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