No, Mr. Biden, it is not true that some big corporations earned $40 billion in profits and paid no taxes.
President Biden’s State of the Union Address was just riddled with economic misinformation and misunderstandings. After nearly four years of failing Bidenomics, the country only averted a recession because the administration changed the definition. As the deficit, debt, under-employment, and inflation rise, scrambling for cash, the president is looking to raise taxes on mean old corporations.
Increasing taxes on greedy corporations may sound like a good idea, but unless you are on welfare, self-employed, or work for the government, your salary comes from a greedy corporation. And the greedier that corporation is, the more money it makes, the more jobs it creates, and the more salaries it pays. Increasing taxes on corporations increases costs, decreases corporate expansion, and encourages reducing the number of personnel. It also drives up the cost of products, resulting in fewer jobs and higher prices.
During the State of the Union address, Biden repeated his favorite statistic: “In 2020, 55 of the biggest companies in America made $40 billion in profits and paid zero in federal income taxes.” And, of course, this is complete nonsense. Companies are taxed on profits. Usually, when socialists make these types of claims, they are referring to gross revenue. In this case, Biden is misquoting a study done by a left-leaning think tank, ITEP, which looked at “pretax profits,” a questionable term. What they were probably examining was pretax income, not profits.
Pre-tax income refers to the total revenue a company earns before accounting for taxes, while profits typically refer to the income remaining after deducting all expenses, including taxes. If the study was indeed looking at pre-tax income rather than profits, it’s possible that these companies reported substantial revenues but utilized various legal deductions, credits, and other tax strategies to reduce their taxable income, resulting in a lower effective tax rate or no federal income tax liability for that specific year.
The irony of the tax credits companies use to avoid paying taxes is that many of them come from liberal Democrat policies. Companies get tax breaks for green initiatives, meeting diversity goals, employing the disabled, Research and Development Tax Credit, Work Opportunity Tax Credit (WOTC), Renewable Energy Tax Credits, Historic Rehabilitation Tax Credit, New Markets Tax Credit (NMTC), Opportunity Zone Tax Incentives, Employee Retention Tax Credit, Qualified Small Business Stock (QSBS) Exclusion, Energy-Efficient Commercial Buildings Tax Deduction, and Health Coverage Tax Credits.
The White House complains about companies using their tax credits while simultaneously inventing new ones.
The average American is suffering under the weight of Bidenflation, coupled with a decline in full-time employment. According to the Bureau of Labor Statistics, “The number of people employed part-time for economic reasons, at 4.4 million, changed little in February. These individuals, who would have preferred full-time employment, were working part-time because their hours had been reduced or they were unable to find full-time jobs.”
Knowing he has to do something to help people’s checkbooks, Biden has decided to go after nuisance charges. In the State of the Union, Biden said, “I’m also getting rid of junk fees—those hidden fees added at the end of your bills without your knowledge. My administration just announced we’re cutting credit card late fees from $32 to just $8.” And while I hate junk fees as much as anyone else, they are there to keep the price down. Take the fees away, and prices will go up to match the current price plus fees.
Thirty years ago, you did not see a line item on your plane ticket receipt showing that you had paid for checked baggage. But you did pay for it. The cost was just built into your ticket. Then oil became prohibitively expensive, and the price of plane tickets went up. So, to bring the price down slightly, the airlines charged a lower price to people without baggage. Today, if you pay $50 for your bag, that is the price of moving one bag from point A to point B. And you only pay for it if you have a bag. But under the old system, because airlines knew some people had bags and some didn’t, every ticket included an average of, say, $30, which everyone paid. If the government tells the airlines they cannot charge you $50 for luggage, they will just add it back into the ticket price, and everyone will pay it, whether they have a bag or not.
Corporations are already facing higher costs than they did under Trump, owing to gasoline being 50% more expensive and interest rates being about five times higher. In many Democrat states and municipalities, companies are being forced to pay above-market rates for low-skilled and unskilled work. The minimum wage in some places is now between $15 and $20 per hour. Companies are also facing higher theft and rising insurance costs. And most haven’t recovered the money they lost during two years of Biden-induced lockdowns and supply chain disruptions.
Eliminating fees (how that would even be legal or how it would be enforced is a frightening prospect) and slapping higher taxes on top of four years of economic destruction is just going to make it even harder for companies that are not Amazon and Walmart to remain in business.
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