Opinion: New York Workers Can’t Afford a Corporate Tax Increase
Presidential election year rhetoric may not seem relevant for New Yorkers. After all, the Empire State has supported the Democratic candidate in ten of the last twelve presidential elections. But the policy proposals tossed around this cycle — like hiking the corporate tax rate from 21% to 28% — will hit closer to home than many might realize, affecting families across New York.
Contrary to popular belief, increasing the corporate tax rate hurts everyday workers, especially in high-cost states like New York.
A new report released by The Alliance for Competitive Taxation, or ACT, and the nonpartisan Tax Foundation found that raising the corporate tax rate to 28% would reduce cumulative wages for New Yorkers by at least $2.7 billion annually over the next ten years, with losses potentially reaching as high as $6.5 billion. Each worker in New York would lose up to nearly $800 a year, on average. Those living in New York’s most expensive areas could lose close to double this amount annually.
These figures reflect basic economic realities. Corporations are not people and cannot bear the burden of the corporate tax. When Washington raises corporate taxes, the tax is paid by consumers due to higher prices, workers through lower wages, and shareholders due to lower returns on savings and pension plans. This is not speculation; it is well-supported by decades of economic research on corporate taxation.
The report explores a range of estimates about what percentage of corporate taxes are borne by workers. At the low end, it uses the Congressional Budget Office and Joint Committee on Taxation’s assumption that for every $1 in corporate tax, $0.25 is paid by labor. At the higher end, it uses a peer-reviewed study published by International Monetary Fund economist Li Liu and Rutgers University professor Rosanne Altshuler that finds wages are reduced by $0.60 for each dollar of corporate tax.
If policymakers raise the corporate tax rate, workers at every income level — not just the wealthy — will pay the increased tax burden. Even the U.S. Department of Treasury acknowledges that families earning less than $72,500 annually bear a greater burden from corporate income taxes than from individual income taxes. Over time, raising the corporate rate will impose $500 billion in higher taxes on individuals making less than $300,000 a year — who get hit twice, lower wages and higher costs for goods.
Simply put, raising taxes on New York corporations will reduce workers paychecks, hurt the local economy and give America’s global competitors a major advantage over New York companies and their workers.
New Yorkers already face soaring housing costs, high state taxes, and burdensome childcare expenses that drive hard working families out — so much so that the state lead the nation in population loss. Higher corporate taxes would further add to their economic strain. New Yorkers cannot afford to pay more, and policymakers representing New Yorkers should be finding ways to lower the cost of living, not raise it.
Both parties in Congress should be wary of raising the current corporate tax rate, which today is producing more government revenue than was projected at the pre-2017 rate. Locking in the current rate will help protect workers’ wages, preserve U.S. economic competitiveness, and incentivize innovation.
There’s no certainty that the corporate rate will be raised, but the prospect alone is worrisome enough. The 2017 Tax Cuts and Jobs Act codified the 21% corporate tax rate — setting the U.S. rate in the middle rather than the highest among advanced economies — but the looming tax debate in Washington next year could threaten that. As the data show, that should worry us all. Even New Yorkers.