The American economy has weathered quite a few storms over the years, including the recent economic fallout brought on by COVID-19 that upended our nation and way of life. Fortunately, we always seem to bounce back, largely thanks to the competitiveness of our businesses and leading industries.
But what happens if that competitiveness is withered away by tax hikes? What happens to our economy and our communities? We may soon just find out should Washington bureaucrats get their way.
While the Build Back Better (BBB) agenda may have stalled, certain portions of it are certainly still on the table in Washington. Lawmakers in the capital hope to increase corporate income taxes — specifically the corporate tax rate and the Global Intangible Low Tax Income (GILTI) rate to pay for their social spending agenda. These legislators suggest that such tax hikes will only affect the bottom lines of large companies that can afford to pay them. But they are wrong. Businesses of all sizes across Louisiana and the rest of the country will feel these impacts, to the detriment of workers and their communities.
As a small business owner myself, these potential tax increases have me gravely concerned. A report from the US Chamber of Commerce found that 1.4 million small businesses — employing nearly 13 million Americans — would see a significantly higher tax bill with a corporate tax hike. Many of these small businesses are just getting back on their feet following the COVID pandemic, now is certainly not the time to increase costs.
It is also no secret that the financial costs of raising the corporate tax rate largely fall upon people like you and me. Studies from nonpartisan groups like the Tax Foundation have found that the burden of the corporate tax rate — anywhere between 50% and 100% — is felt by workers through decreases in wage and job growth. That means that everyday Americans, regardless of whether they work at a Fortune 500 or a mom-and-pop store on Main Street, will feel the impacts of a higher corporate tax rate in their paychecks.
Additionally, increases to the GILTI rate will prove drastic for the businesses, workers, and supply chains that we all collectively rely on. GILTI is a tax placed upon the foreign earnings made abroad by American companies, so if a business — regardless of size— use foreign suppliers or have a foreign market presence, then they will be hit with a fee by GILTI.
At its current rate of 10.5%, GILTI has done exactly what it was intended to do: keep American jobs, companies, and profits in the United States. But if increased, we risk harming our competitiveness and regulatory environment that attracts entrepreneurs, small businesses, and other enterprises to invest and grow here at home.
Given that American companies are already at a competitive disadvantage due to the current restraints of GILTI, which is the only such global tax currently in place in the world, it is self-defeating to increase the GILTI rate before other nations. Rivals like China and Russia will surely continue their efforts to gain a competitive advantage over American companies — we should not do their job for them.
Competitiveness has been at the heart of American growth and innovation since the founding of our country. Our economic progress is tied to our willingness to support businesses and workers, without forcing them to forfeit their bottom lines to the government.
But if these increases to the corporate tax rate and GILTI are achieved, our economy risks moving backward, threatening the livelihoods of Main Street businesses and workers, as well as the larger companies that call Louisiana home. It is clear that we need Washington to say no to these wide-sweeping tax increases, and instead stand up for the little guy, not knock him down.
D.K. Willard is a small business owner in Louisiana.