Dems to Force a 26.5% Federal Corporate Tax Rate, Higher Than China’s


The House Ways and Means Committee on Monday released legislation aimed at paying for Democrats’ $3.5 trillion in far-left social spending priorities. It will raise the federal corporate income tax rate hike from 21% to 26.5%

Who will do business with the USA? It puts us at an extreme disadvantage with Europe and China.

The legislation includes a host of tax increases focused on high-income individuals and corporations. It would increase the top capital gains rate from 20 percent to 25 percent, raise the top individual tax rate from 37 percent to 39.6 percent and impose a 3 percent surtax on individuals’ income above $5 million.

It will allegedly pay for some of the enormous welfare state proposals and wasteful climate change initiatives in their Bernie Sanders-produced $3.5 trillion bill, which is actually over $5 trillion.

A 26.5% federal corporate tax rate would result in a combined federal and state rate of 31%, higher than China and higher than America’s major economic competitors. The developed world average (OECD) is 23.5%.

U.S. Federal + State Tax Rate Under Democrat Plan: 31% 

China’s Corporate Tax Rate 25% 

Developed World (OECD) Average National + Subnational Rate: 23.5%


“Raising the corporate tax rate is Biden’s next big mistake,” said Grover Norquist, president of Americans for Tax Reform. “A corporate tax hike will decrease wages, increase prices, and hurt American competitiveness.”

The Democrat proposal is contrary to the wishes of voters who want the U.S. corporate income tax rate to be competitive with China, according to polling conducted by HarrisX.

After voters were informed that China has a 25 percent corporate rate, they were asked “At what level should the US set the corporate tax rate?” Among all respondents, the median answer was 21 percent.

A Corporate Tax Hike Would Hit Small Businesses Organized as C-Corporations

As noted by the Small Business Administration Office of Advocacy, there are 31.7 million small businesses in the U.S. Of those, 25.7 million have no employees, while 6 million have employees. Of these 6 million small employers, 16.8 percent, or over 1 million of these businesses are classified as c-corporations. The SBA classifies a small employer as any independent business with fewer than 500 employees.

A recent study from the U.S. Chamber of Commerce found that 1.4 million small businesses organized as C-corporations will get hit by Biden’s corporate tax rate hike.

Biden claims his tax plan makes large corporations pay their “fair share.” However, the plan will raise taxes on many small businesses that are structured as corporations.

Workers Will Bear the Burden of an Increased Corporate Tax Rate

Such a hike will cause businesses to invest less in the United States and more overseas (or not at all), resulting in fewer job opportunities and lower wages for American workers:

  • A Treasury Department study estimated that “a country with a 1 percentage point lower tax rate than its competitors attracts 3 percent more capital.” This is because raising the corporate rate makes the United States a less attractive place to invest profits.
  • According to the Stephen Entin of the Tax Foundation, labor (or workers) bear an estimated 70 percent of the corporate income tax in the form of wages and employment.
  • A 2012 Harvard Business Review piece by Mihir A. Desai notes that raising the corporate tax lands “straight on the back” of the American worker and will see a decline in real wages.
  • A 2012 paper at the University of Warwick and University of Oxford found that a $1 increase in the corporate tax reduces wages by 92 cents in the long term. This study was conducted by Wiji Arulampalam, Michael P. Devereux, and Giorgia Maffini and studied over 55,000 businesses located in nine European countries over the period 1996-2003.
  • Even the left-of-center Tax Policy Center estimates that 20 percent of the burden of the corporate income tax is borne by labor.

A Corporate Income Tax Hike Would Increase the Cost of Goods and Services

Raising the corporate income tax would cause prices to increase for American consumers in a couple of ways. A 2020 study by the National Bureau of Economic Research found that 31% of the corporate tax falls on consumers. Additionally, customers directly bear the cost of corporate income taxes imposed on utility companies. In this way, customers would have to pay more for their utility use.

Already, inflation levels are rising. Consumer prices increased by 5.4 percent on an annualized basis in July, according to the Bureau of Labor Statistics (BLS). In January 2021, before Joe Biden took over the presidency, annual inflation was at a stable 1.4 percent. If Americans are struggling to afford goods and services now, they certainly will be after the corporate income tax is implemented.

A 26.5% Corporate Tax Rate Would Threaten American Life Savings

A corporate tax increase will threaten the life savings of families by reducing the value of publicly traded stocks in brokerage accounts or in 401(k)s. Individual investors opened 10 million new brokerage accounts in 2020 and at least 53% of households own stock. In addition, 80 million to 100 million people have a 401(k), and 46.4 million households have an individual retirement account.

President Biden and Democrats continually claim their tax hikes will hold middle-class families and small businesses harmless. However, the facts do not support this case. If Democrats have their way and raise taxes, millions of main street businesses, low- and middle-income workers, and retirees will be hit. Lawmakers must reject the 26.5% corporate income tax rate hike.


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