U.S. Democratic presidential candidate Joe Biden speaks during a drive-in campaign event in Toledo, Ohio, October 12, 2020.
Rebecca Cook | Reuters
One of Joe Biden’s economic advisors said Wednesday that he’s not ready to “litigate” the timing of a planned corporate tax hike with the U.S. economy still recovering from the coronavirus recession.
Asked by Washington Post economics reporter Heather Long to clarify if a Biden administration would still pursue a corporate tax hike if the U.S. economy was still struggling, informal campaign advisor Jared Bernstein declined to offer specifics.
“I’m not going to litigate the timing of that set of policies,” said Bernstein, who served as former chief economist to Vice President Biden.
The Biden campaign has said it plans to raise the rate businesses pay from the current 21% to the proposed 28% to help fund sweeping initiatives the former vice president has promised.
The Biden advisor also noted that virus control and quick fiscal stimulus would likely be the Biden administration’s top two economic priorities before moving on to more-permanent structural changes.
“I think the timing of the fiscal-relief plan — the timing of virus control and fiscal relief — are very much baked into the cake,” he added.
Bernstein, who spoke at the virtual Milken Institutes Global Conference, noted that the partial rollback to President Donald Trump’s 2017 tax cuts would be used to help fund a slew of government programs that could help the U.S. recovery from the pandemic.
“We have to push through policy, because aggregate demand on its own won’t get there,” Bernstein said in a reference to a sharp pullback in normal consumer activity. The Biden plan includes “deep investments in child care, in elder care, in housing, in clean energy, in public transit, in renewables.”
Biden’s tax proposals would increase federal revenues relative to the status quo by about $4 trillion between 2021 and 2030, according to the Tax Policy Center. About half of the revenue gain would come from higher rates on high-income households and about one-third of the added cash would come from the elevated corporate rate, the center found.
But some businesses have expressed worries that a hike in the corporate tax rate could exacerbate an already-fraught economic backdrop and dampen already-compressed profit margins.
Any perceived signal from the Biden team that those tax increases may be delayed until the economy recovers could prove welcome to the business community.
Other critics worry that such a measure could actually be counterproductive since a higher corporate rate could decrease businesses’ incentive to take advantage of tax breaks Congress created to promote investment in some of Biden’s key priorities including renewable energy and low-income housing.
Bernstein, a senior fellow at the Center on Budget and Policy Priorities, was quick to reiterate that Biden’s tax plans focus on asking businesses and those with high gross income to pay more in taxes.
The Democrat’s plan would revert the top individual income tax rate for incomes above $400,000 from 37% under current law to the pre-Tax Cuts and Jobs Act level of 39.6%. The plan would also tax long-term capital gains at the ordinary income tax rate of 39.6% on income above $1 million.
The economist also argued that the corporate tax, if and when a Biden White House moves to increase it, is “counter-cyclical” insofar as it has a far greater impact on already-profitable firms.
“You have to think about what these taxes are and where they’re targeted,” Bernstein said. “If you have losses … those are deducted so that the corporations that pay the higher tax rate are highly profitable corporations.”