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The National Association of Manufacturers has released a study showing the proposed reversal of the 2017 federal tax cuts now under consideration to pay for the president’s infrastructure program would lead to the loss of 1 million jobs in the first two years.
Rice University economists John Diamond and George Zodrow calculated the effects of increasing the corporate tax rate to 28%, increasing the top marginal tax rate, repealing the 20% pass-through deduction, eliminating certain expensing provisions and more.
The researchers found these changes would cause large negative effects for the economy. The worst of these would include the loss of 1 million jobs lost in the first two years, a GDP drop of $117 billion by 2023, and $80 billion less in capital investments in equipment and structures by 2023.
The 2017 Tax Cuts & Jobs Act lowered the corporate tax rate from 35% to 21%. President Joe Biden’s proposed $2.25 trillion infrastructure package would increase the corporate tax rate to 28% and seeks to establish a minimum global tax.
“As we slowly emerge from the economic catastrophe caused by COVID-19, American businesses are at a pivotal point in our nation’s history,” NAM President & CEO Jay Timmons said. “Manufacturers can, and should, lead the economic recovery in the wake of the pandemic.
“But this study tells us quantitatively what manufacturers from coast to coast will tell you qualitatively: increasing the tax burden on companies in America means fewer American jobs,” Timmons said.
NAM released the economists’ study, “Dynamic Estimates of the Macroeconomic Effects of Tax Rate Increases and Other Tax Policy Changes,” on April 8. To read NAM’s analysis of the report, go here.