Op Ed: Tony Chavonne - Congress should pass targeted tax increases, not increase corporate tax rate
By Tony Chavonne
During his recent trip to Illinois, President Joe Biden made the case for funding trillions of dollars in infrastructure projects through increasing the corporate tax rate. Most Americans agree that infrastructure is critical to the wellbeing of any society. We all want to drive on safe roads, have drinkable water come from the tap, and be able to reliably access broadband in our communities. But where the disagreement typically occurs is how we will pay for these public goods and services.
The original funding plan that President Biden and Congressional Democrats presented revolved around increasing the corporate tax rate across the board, from 21 percent to 28 percent. As negotiations continued, that proposed rate was lowered to 25%, an increase that is still substantial and would be tough for the 99.9% of U.S. businesses that are small businesses to shoulder, particularly at a time when the economy is still recovering from a global pandemic.
While it is understandable that Democrats want businesses to pay their fair share, there are better ways to raise the necessary funds to cover the cost of the much-needed infrastructure plan while also targeting tax increases more effectively than an across-the-board increase on businesses big and small.
By instituting a minimum tax rate, for example, in conjunction with a domestic carbon tax, Congress could cover the cost of the currently negotiated infrastructure package. And just as importantly, through these targeted tax increases elected officials can ensure that businesses who currently avoid taxes pay their fair share while helping address climate change. This combination would be a win-win for our country, without putting undue costs on small businesses.
If the corporate tax rate is increased, large corporations with teams of lawyers will ensure that big businesses avoid all possible taxation - something that your local mom and pop shop cannot do. But even if they weren’t incredibly effective at avoiding taxation, most big businesses can easily shoulder the cost of increased taxation, either increasing prices or laying off workers - both of which hurt low-income families while the CEO’s remain unfazed.
That is not to say that the U.S. government shouldn’t collect more in taxes. But instead of punishing small businesses trying to make ends meet during this difficult time, the Biden administration should focus on targeted tax increases that ensure businesses are paying their fair share, and one way to do this is through an Alternative Minimum Tax (AMT).
An AMT places a floor on the percentage of taxes that a filer must pay, no matter how many deductions or credits the filer claims. The U.S. already has an alternative minimum tax for taxpayers who earn above certain thresholds, and we used to have one for businesses until the Republican tax cut bill repealed it.
If reinstated, the AMT on businesses would result in roughly $40 billion in additional revenue that could be spent on infrastructure projects - while also ensuring that businesses are paying a minimum of taxes. As it stands, 55 percent of America's largest businesses paid no taxes last year on billions of dollars in profits.
But the AMT is not the only targeted tax increase that would make our economic system more fair. Congress could institute a carbon tax, which would not only raise revenue, but ensure that U.S. companies are being held accountable for their contribution to climate change. A domestic carbon tax puts a price on the amount of CO2 emissions that a company produces, which is collected as a tax. This would have dual purposes. First, it would incentivize American companies to innovate and reduce the amount of carbon emissions they emit, and an added benefit is that those technological innovations could be exported to other countries to help them reduce their emissions. Second, this tax raises a significant amount of revenue, with estimates stating that carbon tax could generate nearly $2 trillion over 10 years.
For far too long, businesses in our country have been able to pollute without having to face the costs of how that pollution contributes to climate change. With a carbon tax, businesses would be financially discouraged to pollute while also paying for cleaner, greener infrastructure. And the end result would be a healthier environment for American families.
There are clearly other ways to raise revenue other than increasing taxation on businesses across the board, and given Democrats' firm support for the working class, I hope they will consider these options first. Otherwise, we can expect prices to rise, inflation to get worse, small businesses to suffer, all while giant corporations continue successfully avoiding taxation.
Anthony G. "Tony" Chavonne is an American politician, accountant and realtor. He served as the Mayor of Fayetteville, North Carolina, for four consecutive, two-year terms from 2005 until 2013. First elected in 2005, Chavonne ran unopposed in 2007. He again won re-election in 2009 and 2011. In 2013, Chavonne announced that he would not seek re-election after eight years in office.
During his tenure as mayor, the city's population expanded from 150,000 people to over 200,000 people. Among other innovations in the city during his tenure is the adoption of curb-side recycling.
Chavonne is a realtor and accountant. He was general manager of Fayetteville Publishing Company until he retired in 2004. He is an alumnus of the University of North Carolina at Chapel Hill.
