The Democrats’ reconciliation bill, deceitfully named the “Inflation Reduction Act,” contained a reckless 15% corporate minimum book tax. This business tax will be passed on to consumers, thus worsening inflation. This tax will also be borne by workers, reducing wages and killing jobs.

It is unfathomable that Democrats have imposed this costly tax during a recession and record high inflation. My colleague, Patrice Onwuka, wrote about some of the implications of tax increases overall on households, but let me explain more about the corporate minimum book tax. 

This 15% tax will be imposed on the financial statement income of American businesses reporting $1 billion in profits for the past three years. It is expected to raise taxes by $313 billion

The Left asserts this tax is necessary because corporations “exploit tax loopholes.” In reality, corporations are using tax deductions exactly as they were designed. Congress created these deductions in order to promote job creation, growth, and investment. At one point, deductions of this nature were bipartisan. 

Notably, the Obama White House included full business expensing in several of their proposed budgets. Republicans later passed full business expensing in 2017. In one press release, President Obama argued that businesses could use expensing to “expand or hire new workers right now, and [provide] a strong incentive to increase investment now, creating even more jobs.” 

The Left further justifies this tax by claiming it only targets large corporations. What is ignored, though, is who actually pays for corporate taxes. Consumers and laborers will bear the brunt of this tax.  

This tax hike will be passed on to consumers through higher prices, as if rampant inflation wasn’t painful enough. According to a 2020 National Bureau of Economic Research paper, 31% of the corporate tax rate is borne by consumers through higher prices of goods and services.

This phenomenon is well-understood by Americans. By an 81 to 19 margin, voters believe raising taxes on corporations will increase the cost of goods and services. 

To make matters worse, the NBER study also found that affordable products are significantly more responsive to corporate tax changes. In other words, the prices of low-cost products that most Americans rely on would increase even more than high-cost goods. Today’s record inflation already disproportionately harms low- and middle-income Americans. Democrats’ proposal would further handicap families’ ability to endure the recession.

The rest of the corporate tax burden is primarily borne by workers in the form of fewer jobs and lower wages. As noted in a 2017 report by Stephen Entin of the Tax Foundation, 70% of corporate taxes are borne by labor. Other economists argue that anywhere from 50% to 100% of the tax hits workers. Even the left-of-center Tax Policy Center—making all assumptions in their favor—estimates that 20% of the burden of the corporate income tax is borne by labor.

The Tax Foundation found, among all the tax increases included in last December’s “Build Back Better Act,” the minimum tax on corporate book income was the most economically damaging. This is largely due to its aforementioned effects on employment. This provision alone would reduce GDP by 0.1% and kill about 27,000 jobs

The 15% minimum book income tax is not designed to alleviate inflation. Democrats have simply repackaged the provisions that have been on their agenda for years as solutions to today’s crisis, which happens to be inflation. 

Evidently, this tax will worsen every major problem the American people face. This tax will be passed on to consumers through higher prices, thus worsening inflation. This tax sends the country deeper into recession, as it reduces GDP by 0.1%. Despite employment not being fully recovered from the pandemic, this tax eliminates 27,000 jobs. 

It is incredibly irresponsible for Democrats to impose this tax on the American people. When families are punished by exacerbated inflation, they will have Washington to thank.