Why Democrats Can’t Pay for Their Ambitions

Benjamin Franklin was right about death and taxes, but new taxes only become inevitable when a Democrat is elected president, and here we are.

The House Ways and Means Committee released an outline of tax proposals to offset President Biden’s jaw-dropping spending plans, and it’s the expected assortment of tax increases on business and the affluent that Democrats like to pretend can fund a social-welfare state of the sort that Bernie Sanders has long pined for and advocated.

The individual tax rate would increase from 37 percent to 39.6 percent, the capital-gains rate from 20 percent to 25 percent, and the corporate-tax rate from 21 percent to 26.5 percent, among sundry other provisions befitting the hideously complex U.S. tax regime.

It’s a sign of the scope of Biden plans that the committee version represents a step back from his tax proposals, yet still clocks in at an enormous $2.2 trillion in estimated new revenue over ten years.

The corporate taxes are particularly noxious. Democrats love the politics of taxing corporations, based on the lazy and wrongheaded idea that the corporate tax is the way to stick it to executives and shareholders. To the contrary, if businesses are taxed at a higher rate, they have less resources available for the capital investments that improve worker productivity over time. This ultimately means lower wages for workers.

It is telling that no one is talking about going back up to the pre-Trump rate of 35 percent.

According to the Tax Foundation, a top corporate rate of 28 percent, the level that Biden favors, would once again give the U.S. the highest rate in the OECD, at 32.3 percent once state-level corporate taxes are factored in as well. France currently has the highest rate but is set to reduce it next year.