By Peter J. Ferrara, Heartland Institute
Democrat Presidential nominee Joe Biden has already said the first thing he is going to do if elected President is “repeal those Trump Tax Cuts.” He means specifically that he would repeal the 2017 Tax Cuts and Jobs Act.
Biden’s plan would involve a tax increase of nearly $4 trillion over 10 years. With the 2017 Trump tax reform gone, federal taxes on working people would be governed by the Obama-Biden American Taxpayer Relief Act of 2012. A middle class married couple with $78,000 in combined wage income would see their federal income tax rate of 12% under Trump’s tax reform more than double to 25%.
Plus, the employee share of the payroll tax rises by another 7.65%, for a total tax rate of about one third (32.65%) of wages. Many workers may see their pay decline by another 7.65% as employers reduce wages to compensate for their higher share, also. Maybe this is what Barack Obama meant when he said that all taxpayers must pay their “fair share.”
Restoring the Obama-Biden tax hikes would have government take 40% out of the pay of middle-class workers, for those workers who are lucky enough to keep their jobs. America is suffering from double-digit unemployment now. Even liberal Keynesian economics advises that tax increases are contractionary, meaning they worsen rather than counter the downturn. That is what happened at the start of the Great Depression almost 100 years ago, when President Herbert Hoover increased taxes to balance the budget, because businesses don’t pay much in taxes when they are going bankrupt.
Further middle-class tax increases under Biden’s proposed repeal of tax reform would include eliminating the doubling of the standard deduction, and the doubling of the child tax credit.
Tax increases at the start of the Great Depression were not a solution, New Deal or otherwise. Double digit unemployment of nearly 25% carried on for nearly 10 years, until World War II effectively ended the downturn.
But this is just a start for Biden’s economic policies. In addition to creating unemployment, Biden’s Green New Deal will cost trillions as well. The middle class will have to bear the burdens of these costs as well, as electricity from wind power and solar power are much more expensive than electricity produced through coal powered plants.
Manufacturing is energy intensive. So, the higher energy costs brought on by Biden’s Green New Deal will kill blue-collar manufacturing jobs, as well as blue-collar jobs in oil production, coal production, and natural gas. This is a death knell for Trump’s Blue-Collar Boom, with the lowest unemployment in American history for Blacks, Hispanics, Asians, single women, and youth (teens). Trump’s economy also brought record wages, with an all-time record for median household middle class income, over $65,000 annually.
Anyway you cut it, Joe Biden’s economic plan would be devastating for America. Facing so many challenges lately, American doesn’t need another Great Depression to make matters worse.
Peter Ferrara (think@Heartland.org) is a Senior Fellow at the Heartland Institute and at the National Tax Limitation Foundation. He formerly served in the White House Office of Policy Development under President Reagan, Associate Deputy Attorney General of the United States under President George H.W. Bush, and the Dunn Liberty Fellow in Economics at the King’s College in New York.