President Biden proposed a 7-point hike in the corporate tax rate to 28 percent, a new minimum book tax on corporate profits, and higher taxes on international activity. We estimated these proposals would reduce the size of the economy (GDP) by 1.6 percent over the long run and eliminate 542,000 jobs.
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In dollar terms, the industries that would account for the largest book minimum tax liabilities are manufacturing, at $73.2 billion, followed by finance, insurance, and management at $46.9 billion.
While exempting accelerated depreciation from the book minimum tax would reduce some of the economic harm of the tax, there remain many unresolved problems within the design and structure of the tax that make it a poorly chosen revenue option.
While the book minimum tax is smaller in scale than the proposed original corporate rate increases, it would introduce more complexity, inefficiency, and problems at the industry- and sector-levels that a corporate rate increase would not. Neither option is an optimal way to raise new tax revenues.
The Build Back Better Act would raise taxes to pay for social spending programs. But the design of some of the tax increases may end up hurting private pensions, among other problems.