Kamala Harris's corporate tax hike would hurt innovation, American workers

While Americans struggle to afford basic necessities, Vice President Kamala Harris continues to campaign on the same economic policies that caused inflation to skyrocket. In a speech on her economic plans, she promised to invest in “American innovation and entrepreneurship" and “always make sure we have the strongest economy.”

Notably missing from the speech was one plank of her platform that even she seems to struggle to square with an “opportunity economy” — her proposed increase in the corporate tax rate from 21 to 28 percent.

In proposing a higher corporate tax rate, Harris demonstrates that she cannot deliver on her pledge to ensure that America continues to outcompete the world. A higher corporate tax rate would stifle innovation and burden American companies with costs that ultimately will be paid by workers, consumers and retirees.

American businesses operate in a global ecosystem. Before Republicans’ 2017 tax overhaul, there was bipartisan agreement that the 35 percent U.S. corporate tax rate was too high. It was causing some businesses to face foreign acquisitions and others to relocate abroad. By lowering the corporate tax rate to 21 percent, the Tax Cuts and Jobs Act helped level the playing field for U.S. companies competing globally against foreign multinationals. Among industrialized democracies, the U.S. corporate tax rate went from the world’s second-highest to the middle of the pack.

This change brought companies and jobs back home. A competitive corporate tax rate, paired with other pro-growth tax policies and international tax reforms, meant U.S. companies and workers could win in the global marketplace. Domestic investment increased by 20 percent for affected firms, and companies repatriated more than $2.5 trillion in overseas earnings. The lower rate fueled economic growth, demonstrating the Organization for Economic Co-operation and Development’s observation that a lower corporate tax rate incentivizes investment in capital formation, entrepreneurship and productivity.

The Tax Cuts and Jobs Act didn’t just lower the corporate tax rate — it broadened the tax base, including instituting the first global minimum tax of its kind. With a broader base and a more pro-growth tax code, the Treasury actually collected more revenue than projected. Since the pandemic, even after adjusting for unprecedented inflation fueled by the Biden-Harris administration’s policies, federal revenues have been over $100 billion higher than they would have been without the Tax Cuts and Jobs Act.

These benefits also flowed to workers. With a lower corporate tax rate, real median household income rose by more than $5,000, more than the increases of the previous decade combined. Employment also soared — by 2025, the legislation is projected to have generated over 1.4 million full-time equivalent jobs. Manufacturing jobs, which had been disappearing, reached the highest level seen in two decades.

Critics say that corporations must pay their “fair share” — but who would really bear the brunt of the corporate tax rate hike? The corporate tax rate is correlated with growth in part because its cost is not just borne by owners and shareholders. The burden of the corporate tax rate also hits employees, who receive lower wages, customers, who pay higher prices, and retirees, whose IRAs, 401(k)s and pensions suffer. And after the last four years, all Americans are familiar with inheriting business burdens in the form of inflation, with costs up over 20 percent under the Biden-Harris administration.

Ultimately, the vice president’s proposed corporate tax rate hike may actually cost American families more than an individual income tax hike. Treasury Department numbers project a nearly $500 billion tax increase on families earning less than $300,000. Those making under $72,500 would shoulder a larger burden from corporate income taxes than from individual income taxes. The Tax Foundation estimates that an increase in the corporate tax rate to 28 percent would also cost 125,000 jobs and reduce wages up to approximately $81 billion per year.

Domestic impacts would be exacerbated by a lack of investment, as the Biden-Harris regulatory environment has made it more costly for companies to do business in the U.S. Some economists estimate that between 50 and 100 percent of a corporate tax rate hike is borne by working Americans, while others determine over 30 percent hits investors.

But who are these investors? In other words, who owns corporations? Using Federal Reserve data, the Joint Committee on Taxation estimates over 60 percent of U.S. corporate equity is held by household accounts and retirement vehicles, such as brokerage accounts, pension plans, 401(k)s and IRAs. Americans save for retirement with these plans; their economic future is literally vested in American companies.

One study estimates that a 28 percent corporate tax rate could wipe out over $3.6 trillion in S&P 500 market value, threatening Americans’ retirement savings. Corporate tax rate hikes aren’t just company problems — employees see higher corporate taxes reflected in their take home pay, grocery carts and retirement plans.

Despite empty rhetoric on “opportunity and innovation,” Vice President Harris’ plan to raise the corporate tax rate betrays a misunderstanding of what makes American businesses thrive. The U.S. is currently home to the most “unicorns” — companies valued at $1 billion or more — in the world. We’re the world’s innovation epicenter in part because startups founded elsewhere in the world migrate to the U.S., drawn by policies that encourage investment and growth.

When these companies bring their business and jobs here, and domestic business is allowed to flourish, American workers reap the benefits. We all have a vested interest in pro-growth policies, like a low corporate tax rate, that ensure America remains the best place to work, and to start and grow a business.

Mike Crapo, Idaho's senior U.S. senator, is the ranking member of the Senate Finance Committee.