President Biden has proposed increases to corporate taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. es as part of the fiscal year 2022 budget proposal. Using Tax Foundation data on how these tax proposals would impact each congressional district, we isolate the corporate changes to see which districts would have the largest change in tax liability over the next ten years if the Biden corporate tax plan is implemented.
President Biden proposed four major changes to corporate taxation.
- Raise the federal statutory corporate tax rate from 21 percent to 28 percent.
- Increase the tax on Global Intangible Low-Taxed Income (GILTI)Global Intangible Low-Taxed Income (GILTI) is a special way to calculate a U.S. multinational company’s foreign earnings to ensure it pays a minimum level of tax. GILTI was adopted as part of the 2017 Tax Cuts and Jobs Act (TCJA) and can lead to high tax burdens on foreign profits, putting U.S. companies that operate abroad at a disadvantage. from 10.5 percent to 21 percent; calculate GILTI on a country-by-country basis; and eliminate the exemption on the first 10 percent of foreign qualified business asset investment (QBAI).
- Repeal the Foreign Derived Intangible Income (FDII) deduction.
- Levy a new 15 percent minimum tax on the book incomeBook income is the amount of income corporations publicly report on their financial statements to shareholders. This measure is useful for assessing the financial health of a business but often does not reflect economic reality and can result in a firm appearing profitable while paying little or no income tax. of corporations with at least $2 billion in net income.
While advocates of the proposals argue that corporations must pay more tax for their “fair share,” it is important to remember that corporate taxes are paid by workers and corporate shareholders. The corporation may remit the tax, but workers and shareholders within each congressional district ultimately bear the burden of the tax increases.
The congressional districts most impacted by the President’s corporate tax proposals are largely located on the eastern and western coasts, where business income tends to be earned at a disproportionately higher amount compared to other regions of the U.S.
Congressional districts that encompass large, productive cities such as New York, Los Angeles, Miami, and San Francisco will pay higher aggregate amounts of corporate tax than congressional districts that encompass smaller cities and regions of the country.
|Congressional District||2022 Impact||2022-2031 Impact||Tax Increase as Share of Total AGI, 2031|
|NY-12 (New York City)||$2.9 billion||$26.1 billion||1.4%|
|CA-18 (San Francisco Bay Area)||$2.4 billion||$23.2 billion||1.4%|
|NY-10 (New York City)||$2.5 billion||$22.4 billion||1.4%|
|CA-33 (Los Angeles County)||$2.4 billion||$20.8 billion||1.5%|
|CA-12 (San Francisco Bay Area)||$1.6 billion||$15.4 billion||1.3%|
|CT-4 (Bridgeport-Greenwich)||$1.3 billion||$13.0 billion||1.2%|
|FL-19 (Fort Myers/Naples)||$1.3 billion||$11.5 billion||1.4%|
|FL-27 (Miami)||$1.3 billion||$11.3 billion||1.5%|
|NY-3 (Long Island)||$1.2 billion||$11.2 billion||1.3%|
|MA-4 (Southeastern Massachusetts)||$1.1 billion||$10.5 billion||1.2%|
Source: Tax Foundation, “The Impact of the Biden Administration’s Tax Proposals by State and Congressional District,” June 30, 2021.
As a portion of total adjusted gross income (AGI)Adjusted gross income (AGI) is a taxpayer’s total income minus certain “above-the-line” deductions. It is a broad measure that includes income from wages, salaries, interest, dividends, retirement income, Social Security benefits, capital gains, business, and other sources, and subtracts specific deductions. in 2031, the proposed corporate tax increases would raise anywhere from 1.2 percent of AGI in southeastern Massachusetts’ 4th congressional district to 1.5 percent of AGI in California’s 33rd district in Los Angeles County.
While the impact of the gross tax increases may be felt more by higher earners and be offset for lower earners due to the expanded child tax credit (CTC)The federal child tax credit (CTC) is a partially refundable credit that allows low- and moderate-income families to reduce their tax liability dollar-for-dollar by up to ,000 for each qualifying child. The credit phases out depending on the modified adjusted gross income amounts for single filers or joint filers. and earned income tax credit (EITC)The Earned Income Tax Credit (EITC) is a refundable tax credit targeted at low-income working families. The credit offsets tax liability, the total amount of tax debt owed by an individual, corporation, or other entity to a taxing authority like the Internal Revenue Service (IRS), and can even generate a refund, with earned income credit amounts calculated on the basis of income and number of children. , the corporate tax increases in President Biden’s plan would disproportionately harm these congressional districts and make the U.S. less internationally competitive. These tax hikes, along with individual tax increases, would also raise taxes on net for 96 percent of congressional districts by 2031 after these temporary credits expire in 2025.
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