Georgia’s 16 Electoral College votes and its new status as a “swing state” this presidential election have candidates from both parties flocking to the Peach State. Georgians are hearing plenty of policy talk, but they might not realize that some of those proposals — such as hiking the corporate tax rate from 21% to 28% — will hit close to home, affecting families across the state.
Contrary to popular belief, increasing the corporate tax rate hurts everyday workers, especially in high-cost states like Georgia.
Credit: Handout
Credit: Handout
A new report released by the Alliance for Competitive Taxation (ACT) and the nonpartisan Tax Foundation found that raising the corporate tax rate to 28% would reduce cumulative wages for Georgians by at least $979 million annually over the next 10 years, with losses potentially reaching as high as $2.3 billion. Each worker in Georgia would lose up to nearly $553 a year, on average.
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 in higher prices, workers through lower wages, and shareholders with 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 Georgia corporations will reduce workers’ paychecks, hurt the local economy and give America’s global competitors a major advantage over them.
Georgia’s unemployment rate is holding steady, but the number of unemployed individuals reached its highest level in three years. At the same time, housing prices have skyrocketed — the median list price for homes on the market in the state is up more than 35% since 2020 — along with grocery prices. In fact, earlier this year, Georgians had the 12th highest weekly grocery bill in the nation.
Higher corporate taxes would further add to their economic strain. Georgians cannot afford to pay more, and policymakers representing them 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.
Kevin Brady is spokesperson for the Alliance for Competitive Taxation. He represented Texas’s Eighth Congressional District in the House where he was chairman of the House Ways and Means Committee and was an architect of the Tax Cuts and Jobs Act.
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