President Joe Biden admitted that deficits contributed to inflation when he said in a speech on June 3 in Rehoboth Beach, Delaware, that “reducing deficits is another way to reduce inflation.” Unfortunately, the president’s speech was not a call for spending control but a call for more taxes. But in order to tame the inflationary dragon, fiscal policy should instead focus on reducing uncontrolled spending. The president and Congress only try to get out of inflation, especially through corporate taxes, thus increasing the risk of supply-side problems such as shortages and rising prices that are currently plagued by the economy. The following article presents key takeaways from the President’s speech last week and why Biden’s move of raising business taxes will not help much in curbing inflation.
Why Biden’s move of raising business taxes will not help much in curbing inflation
It will aggravate the situation for consumers
According to president Joe Biden, his tax system will only tax “big companies” that are rich. But his claim that taxes apply only to large corporations is false. The president’s budget will raise the corporate tax rate by a third, regardless of the size of the company. Large and small businesses are equally affected by the tax increase. This will be the biggest tax increase for US companies for over 70 years. In fact, this will be the biggest increase in corporate tax rates in developed countries in nearly 40 years. Imposing new taxes on the cost of doing business in the United States will not make goods and services more affordable to United States consumers. From the 1970s to the early 1980s, the United States experienced decades of high inflation and sluggish economic growth, so a combination of sound monetary policy, growth-promoting tax reform, and deregulation allowed us to get back on track. Surprisingly, the Federal Reserve tightened funds, President Ronald Reagan deregulated the economy, and in 1981 supply – oriented law was passed, resulting in inflation rates of 10.4% from 13.5% in 1980, followed by 6.2%. Finally, it dropped to a 3.2% Tax reduction.
By 1983, the economy had embarked on a historic boom while curbing inflation. Increasing corporate taxes, on the other hand, helps curb inflation only by destroying the economy and lowering real wages. Biden’s fiscal plan has no idea that it will help curb the collapse of inflation, given the huge increase in spending on his budget. Biden’s budget proposes 10-year spending that is at least $ 7.5 trillion above the government’s baseline 2021 forecast for the same period.
It distracts from Biden’s individual tax increases
Biden diverted attention away from his own proposed taxes by attacking a straw man. The White House continues to make the false claim that congressional Republicans are planning to raise taxes on American families. The budget of the White House effectively raises the individual tax of nearly 90% of US taxpayers by allowing the 2017 tax cuts and individual provisions of the Employment Act to be phased out. The tax of 2017 reform was a feature of the last 115th Parliament, where the Republicans were the majority in both houses, and the White House had a Republican president. If Congress permits the expiration of individual provisions of tax cuts and employment laws in accordance with Biden’s budget, a typical low-income to a middle-income family of four will receive a federal income tax of approximately $ 1,300 annually from 2026. Spending more money earned by Americans is not a good solution to inflation.
It Calls for Corporate Welfare
The president also called on Congress to pass his green energy proposal. In other words, it is the so-called build-back better energy supply that is stuck in the Senate.
Biden argued that his green energy program would reduce the costs for American families and make America truly energy-independent. Rather than reducing deficits and inflation, the plan proposes $ 555 billion in spending and tax cuts for green energy, climate change initiatives, environmental activities, and other projects. Tax breaks for electric vehicles, solar power, wind turbines, biofuels, and other alternative fuels total $ 320 billion.
Biden’s proposal is nothing more than crony capitalism
President Joe Biden said, “I met nearly 12 CEOs from America’s largest utilities like Southern Company and American Electric Power. They said if we passed the investment, they would soon. I told them that it would reduce the average family’s energy bill by about $ 500 a year. ” The truth is that Americans will eventually have to submit this corporate welfare bill, either with new taxes, deficit-driven inflation, or both.
The Biden administration supports green energy but at the same time imposes a new tax of $ 45 billion on fossil fuel companies, blatantly choosing the winners and losers of the economy. Do not expect this administration to prioritize measures to increase oil supplies and lower gas prices. It’s not what it is. Biden’s key discussions in 2020 describe plans for the oil and gas industry: 1. There are no more subsidies for the fossil fuel industry. No more drilling on federal land. Even offshore, there is no more excavation. There is no way for the oil industry to continue drilling. Limit. As Biden said in May, “When it comes to gas prices, it’s incredible that when God is happy, and it’s over, it’s stronger, the world is stronger, and it’s less dependent. I’m experiencing the transition about fossil fuels.”
In Biden’s speech, he also agreed with the proposed global tax transaction, “We want to work with the [Group of Seven] multinational [tax] initiative.” This is a reference to the “two-sided approach” by the Organization for Economic Co-operation and Development to tackle taxes and digital services in the global economy. Neither of these pillars helps American inflation, but it does expose American families to the negative effects of higher taxes.
The first pillar modifies the game so that the interests of certain large multinationals are taxed in the country even if they do not physically exist. The first pillar modifies the game so that the interests of certain large multinationals are taxed in the country even if they do not physically exist.