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As the debate over President Joe Biden's infrastructure plan begins in earnest, many of its opponents are focused on one specific provision: the White House intends to pay for infrastructure investments in part by raising the corporate tax rate from 21% to 28%.
For many Republicans, this represents an outrageous and intolerable attack on free enterprise.
Not surprisingly, Corporate America is eager to weigh in on the debate. Amazon.com CEO Jeff Bezos, for example, yesterday endorsed elements of Biden's blueprint, adding that the online retail behemoth is "supportive of a rise in the corporate tax rate." (He didn't say how much of a rise.)
Other business leaders, however, aren't willing to go nearly that far. Politico reported overnight that much of Corporate America wants infrastructure investments, but not if it cuts into businesses' bottom lines.
Groups like the Chamber of Commerce and the Business Roundtable have largely rejected the plan, saying the tax hikes that Biden is proposing to pay for it would crush American competitiveness.... Executives at some of America's largest companies complain much more bitterly in private about the White House approach, arguing that raising the top corporate rate to 28 percent from 21 percent — without restoring deductions eliminated in then-President Donald Trump's 2017 tax cut bill — would damage hiring and the economy.
On the surface, none of this is especially surprising. Increasing the corporate tax rate is popular with the American mainstream, but no one seriously expected executives, en masse, to start endorsing the president's proposal.
But there's an element to this that too often gets overlooked: the Republican plan that lowered the corporate tax rate in the first place didn't work.
It was four years ago when Donald Trump and GOP lawmakers slashed the corporate tax rate from 35% to 21%, which led Republicans to make bold boasts about the policy's many benefits. By cutting the corporate rate, Republicans insisted, Americans would soon see vastly greater business investments, improved private-sector hiring, higher wages, and a policy that paid for itself.
Progressive critics of the Republican plan, meanwhile, said none of these benefits would materialize, and the corporate beneficiaries of the tax breaks would use their windfalls on priorities such as stock buybacks.
It wasn't long before we learned who was right. The corporate tax cut didn't improve business investments, didn't fuel private-sector hiring, didn't improve wages, and didn't pay for itself. Stock buybacks, however, soared. (All of this, of course, pre-dates the pandemic.)
The relevance should be obvious: Republicans and private-sector opponents of the American Jobs Act are now demanding the maintenance of a corporate tax break that failed.
In other words, Biden is effectively saying, "The tax break didn't work, so let's invest the money in infrastructure," to which the right is effectively responding, "It doesn't matter if the policy didn't work, we just want to keep the money."