Claim: In a recent tweet, Donald Trump Jr. claimed that Joe Biden wanted to raise taxes on 82% of Americans.
Rating: This claim is FALSE. Biden’s proposed tax increase is only on corporations and 1% of wage earners making over $400,000 a year.
According to the Congressional Budget Office, the U.S. will experience a record budget deficit of $3.3 trillion this year. Joe Biden has proposed balancing the budget by increasing taxes on corporations and on the top 1% of earners who earn over $400,000 per year.
In an interview with ABC News, Biden has said that there will be “no new taxes” for individuals who earn under $400,000 a year. He also said, “There will be no raising taxes” on the “90% of the businesses out there [that] are mom and pop businesses—that employ less than 50 people.”
Donald Trump Jr’s claim, that “Joe Biden wants to raise taxes on 82% of all Americans,” is based on the idea that companies will pass these increased taxes on to their employees in the form of lower wages.
However, both conservative and liberal tax policy groups have analyzed the likely impact of Biden’s corporate taxes, and have determined that the impact on 80% of Americans to be minimal, with the majority of the group seeing less than a 2% change in their pay. Even this is a worst case scenario as multiple studies have failed to prove a strong effect on individual wages from corporate taxes. Wages are more impacted by competition within a labor market than corporate taxes.
In addition, the vast majority of the federal budget, over $4 trillion, comes from payroll and income taxes, which are directly related to the number of employees a corporation has as well as their pay. This model made sense when the cost of labor was high relative to corporate earnings. However, due to increased efficiency and outsourcing of jobs, the percentage of corporate income that is spent on labor has decreased since the 1960s, with the bulk of the decline in the last 20 years alone. Increased automation and efficiency will increase this trend.
Meanwhile corporate taxes are only 7% of the federal budget. The original theory behind low corporate taxes was that they could encourage hiring, and federal tax would increase as a function of payroll and income taxes on those employees. However, this has not been the case, and the number of federal bailouts in major industries like insurance, banking, and automotive is primarily funded through taxpayers—even as these industries continue to improve efficiency and shed employees.
Companies continue to pay an ever-decreasing share of corporate profits on wages. The Biden proposal is an effort to meet this trend and reduce the tax burden on individual earners. Biden is proposing raising the corporate tax rate from 21% to 28%. The corporate tax rate used to be 35% but was cut through the 2017 Tax Cuts and Jobs Act, championed by President Trump.
A number of independent economic think tanks have estimated that Biden’s plan would raise between $3.5 trillion and $4 trillion over 10 years.
In terms of developed countries, the US has by far the lowest tax burden as a percentage of GDP—a difference so large that even if a Biden tax plan is enacted, the US would still rank near the bottom in terms of taxes for corporations.
Conclusion: This claim of increased taxes on the vast majority of Americans is false, as the actual proposed tax increase is only on corporations and 1% of wage earners. It involves making unwarranted conclusions on how American companies will react after corporate taxes are raised.