By Bowen Xiao
If President Joe Biden’s corporate tax increases and other changes to the tax code are passed unchanged, about 1 million jobs will be lost in the first two years following passage and economic activity will also decrease, according to a new economic study (pdf).
The study by the National Association of Manufacturers (NAM), conducted by Rice University economists, found Biden’s infrastructure plans would cause a barrage of negative consequences. Biden has called for a corporate tax increase to 28 percent from the current 21 percent.
“This study tells us quantitatively what manufacturers from coast to coast will tell you qualitatively: increasing the tax burden on companies in America means fewer American jobs. One million jobs would be lost in the first two years, to be exact,” NAM President and CEO Jay Timmons said in a statement on April 8.
The study calculated the effects of increasing the corporate tax rate, increasing the top marginal tax rate, repealing the 20 percent pass-through deduction, eliminating certain expensing provisions, and other actions outlined in Biden’s infrastructure proposal.
Other consequences include the GDP shrinking by $117 billion by 2023, $190 billion in 2026, and $119 billion in 2031.
Total employment, which is tracked by the number of hours worked, would also fall by 0.7 percent initially before moderating. The reduction in hours worked equals an employment loss of 1 million full-time jobs in 2023. By 2026, these jobs would still be gone before later stabilizing.
According to the study, the average annual reduction in employment would be equivalent to a loss of 600,000 jobs each year over 10 years.
Ordinary capital, or investments in equipment and structures, would meanwhile “be $80 billion less in 2023 and $83 billion and $66 billion less in 2026 and 2031, respectively.”
In the long run, the study found that real wages would fall by 0.6 percent and total labor compensation, including wages and benefits, would decline by 0.6 percent initially before falling by 0.3 percent after 10 years. Total compensation, in the long run, would also decline by 0.6 percent.
Biden’s wide-ranging proposal, the details of which were laid out in a fact sheet released by the White House on March 31, is the first part of a two-part economic plan he aims to pass through Congress in the coming months. The second part of his plan features even more ideals outside of the traditional infrastructure scope, such as expanding health insurance coverage, extending the expanded child tax benefit, and more.
Some economists have criticized the package as failing to deliver on traditional funding, and that it amounts to a massive federal power grab. They also found fault with the administration’s broad definition of infrastructure.
When Biden first outlined his infrastructure plan last week, he pitched it as “a once-in-a-generation investment in America, unlike anything we’ve seen or done since we built the interstate highway system and the space race decades ago.”
Senate Minority Leader Mitch McConnell (R-Ky.) recently expressed that he’s unlikely to support Biden’s infrastructure plan due to the hefty tax hikes.
“The administration’s non-infrastructure ‘infrastructure bill’ looks like another Trojan horse for far-left demands. Rolling back Right to Work laws. Imposing the biggest new tax hikes in a generation—killing jobs and slowing wage growth when workers need a fast recovery,” he wrote on Twitter.