Costs are passed on to consumers. If you work for and invest in companies, you get hit three times.

 By Phil Gramm and Mike SolonApril 23, 2024 1:48 pm ET

In his call for Congress to repeal the 2017 tax cuts and increase corporate taxrates, President Biden asked: “Are we going to continue with an economy wherethe overwhelming share of the benefits go to big corporations and the verywealthy?” Rep. Richard Neal, ranking Democrat on the House Ways and MeansCommittee, said that extending the tax cuts will do nothing but fill “the pocketsof venture capitalists and some business owners.” President Obama’s topeconomist, Austan Goolsbee, said that debates over who pays the corporate taxare “an argument about whether making corporations pay more income taxeswould trickle down into lower workers’ wages.” But as John Adams once said, facts are stubborn things. Seven years into theweakest recovery in postwar history, as the economy slumped toward arecession, the 2017 tax cuts and the Trump administration’s regulatory reliefsent real median household income soaring by $5,220 in 2019. That’s 49% higherthan the previous highest annual gain in 2015 and 11 times the averagepercentage gain over the previous 50 years. Real median income rose more ininflation-adjusted dollars in 2019 alone than during the entire Obama recoveryfrom 2009-16. The poverty level plunged at the fastest rate since 1966, to thelowest level since the Census Bureau started collecting the data in 1959. The lowest income quintile saw its average real income rise by 9.4% in 2019, theyear after the tax cut took effect. The second quintile (7.4%), middle quintile(6.9%) and fourth quintile (7.8%) all experienced the largest annual incomegrowth in more than a half-century, and the top quintile (7.2%) had its second-highest income growth. The poverty rate in 2019 was the lowest ever recordedfor every category, including individuals, families, unmarried women, blacks,Hispanics and children. Since the Census Bureau doesn’t count refundable tax credits as income for therecipients or count the effect of any other tax change in measuring householdincome, none of these income gains and poverty reductions had anything to dowith the increased child tax credit. Economic growth was almost entirelyresponsible. It’s still a free country, and critics can say whatever they want aboutthe 2017 tax cuts knowing the mainstream media will let them get away with it.But they can’t change the facts. No federal spending or tax policy change in thepast 50 years was followed by as large an increase in real median householdincome or as big a drop in the poverty rate as the Trump tax cuts. Everyone expected that the owners of American public companies would benefit—and they did. The stock market surged in 2017 in anticipation of the tax cutsand, in 2018 and 2019, in response to them. Who owns American corporations?According to Tax Notes, 72% of the value of all domestically held stocks is ownedby pension plans, 401(k)s, individual retirement accounts and charitableorganizations, or held by life insurance companies to fund annuities and deathbenefits. Corporate tax rates, which were the driving force behind the permanent part ofthe 2017 tax cuts, receive less attention than individual income-tax rates onlybecause Americans don’t understand that corporations don’t pay taxes. Acorporate entity is a “pass through” legal structure—a piece of paper in aDelaware filing cabinet. When the corporate tax rate increases, corporations tryto pass the cost on to consumers. To the degree that the entire cost of the taxincrease can’t be passed on to consumers, those costs are borne by employeesand investors. Most economic studies conclude that 50% to 70% of a corporatetax increase not passed on in higher prices is borne by workers, while 30% to 50%is borne by investors. If you consume, you pay the corporate tax. If you consume and work for acorporation, you pay the corporate tax twice. If you consume, work and investyour retirement funds in corporate equities, the corporate tax rate hits you threetimes. Democrats call up the image of the greedy robber baron as apersonification of big corporations, but when you pull back the curtain, it isn’tthe wizard or the robber baron you see but yourself as a consumer, worker andpensioner. Many Americans don’t pay individual income taxes, but all Americans paycorporate taxes. In fact, a recent Treasury study confirms that 92.6 millionfamilies, 49.5% of all American families, pay more in corporate taxes than theydo in individual income taxes. Unfortunately Americans consistentlyunderappreciate the burden the corporate income tax imposes, especially onmiddle- and low-income Americans. President Biden’s proposed corporate taxincreases would raise taxes on more low- and moderate-income Americanfamilies than if he raised individual income-tax rates. Congress should reject Mr. Biden’s efforts to raise corporate tax rates, especiallyhis effort to circumvent Congress and the Constitution with the global minimumcorporate tax. If Congress refuses to adopt the global minimum corporate tax,Mr. Biden would allow foreign countries to tax U.S. subsidiaries to collect theequivalent of the global minimum tax on their U.S. earnings. Congress shouldpass a joint resolution rejecting the global minimum corporate tax. Further, itshould adopt legislation that mandates retaliation against any country trying totax American subsidiaries to collect the corporate minimum tax on U.S. earnings. Mr. Biden and congressional Democrats claim corporations that get taxsubsidies don’t pay their fair share, but the entire Biden program is festoonedwith special-interest corporate subsidies. We should eliminate those subsidiesand use the savings to reduce corporate tax rates. We must never forget that the corporate tax is a tax on everything we buy, a taxon our wages and a tax on our retirement nest eggs. By taxing corporations, theDemocrats are taxing the American people. Mr. Gramm, a former chairman of the Senate Banking Committee, is a visitingscholar at the American Enterprise Institute. Mr. Solon is an adviser to US PolicyMetrics. John Early contributed to this article.