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.