Keith Rothfus: Tax increases could hurt Pa.’s economy, workers
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President Biden’s and congressional liberals’ and progressives’ proposals to increase income taxes on businesses come at a time when Pennsylvanians are still recovering from the coronavirus pandemic.
Because of the pandemic, our state saw nearly one out of three businesses forced to close, the second-highest percentage among all states. The revival of Main Street businesses and the jobs those businesses provide should guide policymakers’ decisions. In making those decisions, we should not be taking two steps backward while trying to move forward.
Unfortunately, that is exactly what they are proposing with their planned tax increases for businesses large and small. Specifically, as part of a bid to pay for massive social spending programs, these lawmakers are plotting a more than 25% increase in the tax rate on America’s corporations, making these American businesses taxed at a rate higher than those in Communist China. Other proposed business tax hikes include gutting the qualified business income tax deduction that the Tax Cuts and Jobs Act of 2017 created to help small businesses compete with the big corporations and increasing the tax rate American companies pay on global intangible low-taxed income (GILTI).
As a former member of Congress, it is my hope that my former colleagues — especially those representing Pennsylvania — recognize the dangers an increased tax burden would present for Pennsylvania’s economy. These proposed tax hikes, aimed at both large corporations and Main Street enterprises alike, will result in reduced job growth, reduced wages and competitive disadvantages at the state, national and international levels.
It is important for the state’s workers, taxpayers and voters to recognize the these plans will have in particular on small businesses. An increased tax burden may very well finish off many of these businesses, some of which have barely survived the pandemic and have been hoping for a return to normal. A massive tax increase now will undoubtedly stall the progress they have made and in turn threaten our state’s overall economic recovery.
Besides squeezing small businesses, an increased tax burden will negatively impact larger companies, and their employees and customers as well. Critical industries, including Pennsylvania’s robust oil and gas sector, are in the crosshairs for higher taxes. In 2019, the sector supported 480,000 Pennsylvania jobs, provided over $40 billion in wages and contributed more than $78 billion to our state’s economy. This is on top of the more than $2 billion in impact fees from oil and gas drilling that have gone toward community investments statewide in education, infrastructure and health care. Higher taxes will not only hurt the communities and families this industry supports, they will also translate into even higher prices that Pennsylvania consumers pay for energy.
In addition to raising corporate tax rates aimed at larger businesses and the increasing of individual rates and weakening the small business qualified income tax deduction that are aimed at small businesses, the liberals’ and progressives’ plan to increase the GILTI tax would also hurt Pennsylvania. Introduced by the 2017 Tax Cuts and Jobs Act as a means to incentivize American businesses to bring back home profits earned overseas so that those dollars could be invested in jobs here, GILTI is a tax placed upon the foreign profits of American companies. At its current rate of 10.5%, it has done its job in keeping the profits of American companies here at home and not stashed abroad in foreign accounts.
However, if GILTI is increased, it would bring devastating consequences. A study by the National Association of Manufacturers found that up to 1 million jobs and nearly $20 billion in economic activity could be lost if GILTI were to be hiked.
Along with GILTI, an additional global minimum tax is being considered. The United States is currently in negotiations to enact just such a tax on multinational businesses from all countries. Raising GILTI before other countries possibly enact a new global minimum tax makes no sense and will hurt our economy more than it helps.
The liberals’ proposals to increase taxes on the state’s businesses are nonsensical and simply wrong for Pennsylvania’s economy and our workers. We must instead pursue policies that promote economic, job and wage growth and which further our state’s recovery. Rather than raising taxes, we should keep our tax rates competitive and instead take aim at the increasing amounts of red tape that entangle businesses and serve to only grow government power.
Keith Rothfus served as the U.S. representative for Pennsylvania’s 12th congressional district from 2013-19.