The Fiscal Year 2024 budget request released by President Joe Biden last week contains tax code changes that would weaken the country’s business competitiveness, according to leading industry advocacy groups.
“There is no escaping the fact that the tax increases in President Biden’s new budget proposal would reverse the recent significant growth we’ve achieved in American manufacturing jobs and investment, National Association of Manufacturers President and CEO Jay Timmons said. “After the 2017 tax reform made rates more competitive, manufacturers kept their promises to raise wages and invest in their communities. In fact, 2018 was the best year for manufacturing job creation in the previous 21 years. And in the past two years, as we rebuilt from the pandemic, we’ve created more jobs in the sector than at any point since the Reagan administration. So it comes as a surprise that President Biden, who has vocally championed manufacturing growth in pushing successfully for infrastructure investment and the CHIPS and Science Act, wants to pursue policies that would undo our progress.”
According to the Tax Foundation, the White House budget calls for nearly $4.7 trillion in new taxes targeted at businesses and high-income individuals, including a higher corporate income tax rate. The president’s budget calls for a corporate rate of 25%, a 7 percentage point jump from the current rate.
Unclear in the new budget is the administration position on how it would handle the 2025 expiration of tax reforms contained in the 2017 Tax Cuts and Jobs Act. Budget materials released by the White House simply said the administration would work with Congress to arrive at a “tax system that rewards work, not wealth.”
“The administration’s proposed budget is a recipe for economic and fiscal disaster. Nearly $2 trillion in spending increases would result in an economy where one out of every four dollars is government spending. An unprecedented $5 trillion in tax increases would hit businesses of all sizes and lead to lower wages for working Americans,” U.S. Chamber of Commerce Executive Vice President Neil Bradley said.
In addition to the call for an increase in the corporate income tax rate, the budget also calls for a top income tax rate of 39.6%. Under the 2017 law, the top rate is 37%. The president also wants to tax capital gains at the same rate as regular income for individuals with more than $1 million in income.
The budget also calls for more drugs to be subject to government price controls, something Arizona Chamber of Commerce & Industry President and CEO Danny Seiden said his group would oppose.
“The Arizona Chamber was the state’s most vocal proponent of the job-creating tax reforms included in the Tax Cuts and Jobs Act, and we were the most vocal opponent of the doomed Build Back Better plan,” Seiden said. “This proposed budget would dramatically roll back the progress made under the TCJA while attempting once again to push through the worst components of Build Back Better. Not only will this plan not survive congressional scrutiny, it could also prove to be a political liability for the White House.”
A tax increase on individual income would be bad news for small businesses, which pay taxes at the individual rate, not the lower corporate rate.
The National Federation of Independent Business panned the proposal.
“The small business economy is still recovering, and business outlook is near historic lows. The expanding list of tax increases included in the FY 2024 proposed budget would crush Main Street’s ability to grow and create jobs,” said Brad Close, president of the National Federation of Independent Business.