Legislation

Five problems with Biden’s inflation plan

After months of dismissing inflation as “transitory” and downplaying how it would harm American families and businesses, President Biden is pushing a “plan” that he says will fight inflation.

But this plan is not new – it contains many of the tax increases and wasteful spending proposals that Democrats pushed in their multi-trillion-dollar reconciliation bill over the past year.

For instance, the proposal contains massive tax increases on American businesses and energy producers that will drive costs higher. The Left is also pushing to include many of the same wasteful subsidies and spending programs including giving the IRS $80 billion in new funding to harass and audit taxpayers.

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Here are five reasons to be concerned with Biden’s plan to fight inflation.

Tax Increases on businesses that will raise the price of goods and services

As part of this plan, Democrats are pushing massive tax increases on American businesses including raising the corporate tax rate to 28 percent, a rate higher than Communist China and the average rate in Europe.

These tax increases will not be paid by large corporations but will be passed along to working families in the form of higher prices. For instance, a 2020 study by the National Bureau of Economic Research found that 31 percent of the corporate tax falls on consumers.

A corporate tax increase will also hit American families and small businesses with higher utility bills and will harm workers in the form of fewer job opportunities and lower wages.

Tax increases on energy that will raise the price of gasoline

The price of gasoline has reached record highs under President Biden and has increased by 49 percent over the past year. However, Democrats are pushing countless tax increases that will only cause prices to increase further.

President Biden’s most recent budget proposal called for 11 tax increases on the oil and gas industry totaling $45 billion over the next decade. These tax increases would only lead to higher prices, less investment, and fewer jobs.

Some progressives want to go even further and impose a windfall profits tax to punish oil and gas producers for high prices.  This was tried and failed in the 1980s because it was extremely complicated, impossible to administer and ineffective in reducing prices. It would be used to finance a new welfare payment, that in combination with other Democratic policies, will pay people not to work and drive inflation.

A Global Minimum Tax that will help foreign rivals take advantage of the U.S.

Democrats want to impose a global minimum tax on American businesses that they say will “level the playing field.” This is a clear attempt to push leftist priorities and would do nothing to help American workers and businesses.

There is also little reason to think foreign countries will keep to this agreement.

The U.S. is routinely involved in disagreement with allied countries over trade issues. There is no reason to think the same dynamics would not occur regarding the global minimum tax and countries would not take steps that protect or provide an advantage to their workers and companies.

There is even less reason to think geopolitical rivals like China and Russia will keep to this agreement instead of pushing their own interests. Worse, there appears to be no arbitration process behind the global minimum tax effort so U.S. workers and businesses would have little recourse when foreign countries fail to play by the rules.

$80 Billion and 87,000 new IRS Agents to harass and audit taxpayers

While President Biden claims new IRS funding is about enforcing the law, it will allow the federal government to audit and harass middle class families and small businesses.

The IRS has said it plans to increase small business audits by 50 percent and impose 1.2 million more annual audits on taxpayers, about half of which would hit households making less than $75,000. 

In addition, the Biden administration wants to have the IRS snoop on bank accounts of virtually every American. According to an analysis by the Joint Committee on Taxation (JCT), this proposal would hit 87 to 134 million Americans earning less than $400,000 per year.

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New wasteful spending that will exacerbate inflation

In addition to massive tax increases, the president’s plan would also increase spending that will exacerbate inflation.

For instance, Democrats want to pass billions in new climate subsidies like tax credits for electric vehicles as well as billions in Obamacare subsidies.

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They may also include wasteful tax subsidies for trial lawyers, union bosses, wealthy blue-state taxpayers and reporters that have the support of virtually every Democrat member of Congress.

This wasteful spending and new tax increases will do little to help American families and businesses but will be a giveaway to progressive special interests and will drive inflation higher.

Grover Norquist is President of Americans for Tax Reform.

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