Americans find themselves looking for the path to restoration of “normal life” post-COVID-19. Having endured almost 18 months of uncertainty around so many elements of our daily lives, from simple things like the availability of toilet paper and flour on grocery store shelves to much harder events, like the closure of businesses and the loss of jobs that were devastating.

The pandemic recovery has brought new uncertainty to our lives, such as the rapid rise in inflation. On June 10, the federal government reported U.S. consumer prices rose steeply in May, leading to the biggest annual increase in nearly 13 years. Not since the Great Recession has such inflation impacted the economy. The Biden Administration assures us it is temporary, but time will tell for sure. The thought is that increase costs for supplies, due to lingering supply chain and labor shortages are to blame.

Interestingly, at the same time that Americans are paying more for goods and services due to inflation caused by increased production costs, the Biden administration is looking to increase another business cost in the way of taxes, proposing to increase the corporate tax rate by 25%. This is the proverbial, salt in the wound.

We’ve been down this road before. Prior to the passage of the Tax Cuts and Job Acts (TCJA) in 2017, American corporations were at a disadvantage in the international market. Our corporations were paying double, sometimes almost as much as three times the taxes as corporations in other countries, like Ireland. Over just a few years, dozens of companies moved their headquarters, and some moved their actual production centers, to these more tax-friendly nations to remain competitive. Since the passage of TCJA, these moves have been practically zero.

The idea of raising taxes, which is passed on to the consumer in higher prices, in times of inflation is anything but a good idea. The circle of impact is obvious, every supply chain manufacturer or producer sees an increase in taxes, raises their price to their customers and it's the consumers who ultimately pay the final bill. Another possible scenario is that businesses will reduce their work force to offset higher operating expenses, jobs are lost and production decreases. And inflation rises.

We have had enough uncertainty. It is time to allow things to correct themselves and for us to get our lives back to normal without the addition of other factors that could have potentially negative, unintended consequences. The Biden administration should abandon this idea, and quickly.

Kelly Rael,

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(4) comments

fishinguy

Your last paragraph is very correct. The current administration is American citizens last, all other non American first. Shuts down jobs, no more energy independence and the list goes on.

Next elections things need to change in a huge way.

pxllr

Fishinguy. It is interesting how you have everything completely miss-interpreted.

You say American citizens 1st, yet you go out of your way to deny or make it exceedingly difficult for certain citizens their constitutional right to vote.

Shut down jobs? We are currently experiencing one of the largest job growths in recent history (past 20 years).

No more Energy independence? When have we had energy independence? If we have had energy independence in the past, then why does the middle eastern oil price affect our oil prices?

The list indeed does go on. Healthcare costs skyrocketing, why, because the insurance and pharmacy companies are raising rates every year. Make it so a person's health care decisions are between them and their doctor(s). Not up to some insurance company as to whether they will cover that procedure or not. The USA is the only major country where GoFundMe is a major healthcare funding source. The USA is the only major country where medical bankruptcy exists. The USA is the only major country where people have to decide to take an Uber cause they can not afford an ambulance. The USA is the only major country where people have to chose life saving medical procedures or their family's housing and food.

We can and must do better!

fishinguy

Pxllr

Hmm I read my comment several times and no mention of “make it exceedingly difficult for certain citizens their constitutional right to vote.” The word “vote” is not in my comment.

“Shut down jobs?” The Keystone pipeline was shut down by the current president. Those were some decent paying positions and all of the trickle down jobs associated with the pipeline.

“No more Energy independence?” Yes under the previous president this country was energy independent. Under previous administration gas prices fell. Look at the gas price increase, now we are at the mercy again of the middle east oil.

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ronzim

Kelly: To begin with, the TCJA was conceived in several economic fallacies. First, is the odd notion the economy is constrained by the productive capacities of its system (the supply side). That notion has been thoroughly debunked over decades. The economy is constrained by the spending (demand side) of its systems (household, business, and government spending).

Second, TCJA was touted for its mythic outcome of new investments in plant, equipment, and employment. Instead, the reduced taxes went almost entirely to increased dividends, stock by-backs and the further enrichment of already wealthy households. The ballyhooed increase in productivity for manufacturers did not materialize and the trend continues downward to this day (BLS reports: Q1/18=+1.1%; Q1/21=-0.09% YOY real growth). Moreover, the continued trend of redistributing income from low/moderate income households to the richer ones, in fact, adversely affects the economy because the marginal propensity to spend is very low for higher incomes, thus, lowering demand.

The increase in competitiveness from TCJA is another fairy tale. Paying lower corporate taxes on their profits would supposedly give them a leg up over firms in other countries with higher tax rates. Even before the TCJA, however, effective corporate tax rates were in line with major trading partners, and the United States raised less revenue from corporate taxes than most other peer countries. In 2017, only four countries in OECD raised less revenue from corporations as a share of GDP than the United States. By 2018, there was only one – Latvia. The most competitive countries had corporate rates 200-400% higher than ours, before TCJA.

The assertion that increasing taxes on immensely profitable corporations would cause inflation is demonstrably false. It is based on the false assumption that supply, not demand, is the primary constraint on growth. In truth, no such inflation is likely to occur because the increased taxation comes almost entirely from wealth storage areas, not the productive economy. This rather quaint notion also overlooks the powerful tools at hand for the FED to reduce inflation (the present goal is 2%).

Finally, it is worth noting that the new revenues from the proposed increases would be used to fund robust economic investments in such things as infrastructure and education, both of which return large multiples of the initial investments to the economy.

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