The desire to tax corporations runs deep in American political culture — and respects no partisan boundaries. If you think liberals are the only ones eager to lighten the wallets of American business, let me introduce you to J.D. Vance, lawyer, venture capitalist, author of Hillbilly Elegy, and likely Republican candidate for the U.S. Senate.
Angered by news reports that corporate leaders are marshaling opposition to state-level election reform laws, Vance was moved to a burst of Twitter outrage. “Raise their taxes and do whatever else is necessary to fight these goons,” he exclaimed. “We can have an American Republic or a global oligarchy, and it’s time for choosing.”
Vance — who was presumably suggesting that we raise corporate taxes, rather than individual taxes for corporate chieftains — went on to describe a role for taxation that transcends mere revenue-raising. Corporate levies could be used to reward friends and punish enemies, he suggested. “At this very moment there are companies (big and small) paying good wages to American workers, investing in their communities, and making it easier for American families,” he wrote. “Cut their taxes. No more subsidies to the anti-American business class.” (Again, there seems to be a curious conflation here of taxpaying business entities and the managers who run them.)
Still, for all his celebrity, Vance is an outlier among Republicans. Conservative, anti-corporate populism is definitely a thing; Sen. Josh Hawley, R-Mo., has made it a trademark, for instance. But especially when it comes to taxes, the party as an institution remains committed to the business-friendly reforms enacted in 2017 as part of the Tax Cuts and Jobs Act.
The same can’t be said for Democrats, most of whom are eager to raise taxes on corporations as part of their new infrastructure package. The Biden administration’s Made in America Tax Plan would revamp numerous corporate and international provisions of the TCJA, including (not least) its marquee tax rate on corporate income, boosting it from 21 percent to 28 percent. (Prior analysis: Tax Notes Federal, Apr. 12, 2021, p. 235.)
Democrats should be pleased with the early polling on President Biden’s tax framework. In a recent Morning Consult survey, 62 percent of registered voters said they strongly or somewhat supported the administration’s plan to pay for infrastructure with corporate tax hikes, 26 percent opposed the approach, and 12 percent said they were unsure.
Those are good numbers for Biden. But they are less good than they were a few weeks ago, when an earlier version of the Morning Consult poll found even broader support for the tax plan. Overall support for Biden’s corporate tax proposals dropped 3 percentage points between the beginning and the middle of April, just barely outside the poll’s margin of error. But support among Republicans slid from 42 percent to 29 percent. Independents cooled on the revenue proposals, too, with support declining from 60 percent to 54 percent.
Still, support for Biden’s infrastructure plan — and the taxes he proposed to pay for it — remains relatively strong. Even 29 percent is a decent number when you’re talking about support from the opposing party.
Reason for Caution
But the White House should avoid overconfidence. After all, issue polls are tricky things. That’s especially true of issue polls about taxation. And triply true of issue polls about corporate taxation.
Tax politics, it has often been said, is about shifting burdens — away from yourself, certainly, and usually away from friends, too. Where those burdens eventually land is less important, as long as it’s somewhere else. Former Sen. Russell B. Long captured this dynamic in his famous quip: “Don’t tax you, don’t tax me, tax that fellow behind the tree.” (The saying, incidentally, almost certainly didn’t originate with Long; others have traced it to at least the 1930s.)
The corporate tax is well suited to this dynamic of burden shifting because the ultimate taxpayer is always uncertain and generally impersonal. In 1954 the economist Gerhard Colm observed that those qualities made the tax “almost ideal” from a politician’s perspective. “There is no other tax which brings in so much money while making so few voters mad,” he wrote in a piece for The American Economic Review.
Colm’s observation has been supported by polling data over the decades. For the most part, when asked if corporations should pay more in taxes, Americans tend to say yes. Asked in 1974, for instance, if business was paying its “fair share,” 59 percent of those polled responded with “not too well” or “not at all well.” In March 1992 a similar question found even more unhappy Americans; only 15 percent said companies were paying their fair share, while 75 percent said they were not (Joseph J. Thorndike, “The Durability of a Dysfunctional Tax: Public Opinion and the Failure of Corporate Tax Reform,” 21 Kan. J.L. & Pub. Pol’y 348-450 (2012)).
When given a choice by pollsters about how to raise more revenue, Americans often look first to corporations. In July 1977, when asked which tax should be the first to go up, 43 percent said the corporate income tax; the sales tax was number two at 23 percent. Similarly, in July 1990, 70 percent supported using the corporate tax to raise more revenue; just 24 percent opposed the idea.
If you’re a Biden adviser, so far, so good. Current polls? Check. Historical polls? Check.
But those historical polls are cherry-picked. A broader look at historical polling data reveals more ambivalence in the electorate. Ask Americans if corporations should pay more, and they say yes. But frame a question about corporate taxes in terms of job creation, and the polls start to look a bit different.
In the late 1930s — a period not typically regarded as especially pro-business — opinion polls revealed support for business tax cuts designed to spur the economy. In March 1938 a Gallup survey found 68 percent in favor of a business tax cut to help restore prosperity. In 1952 another Gallup Poll found 41 percent in favor of a corporate tax cut, as opposed to just 15 percent supporting a tax increase. And in September 1974, 64 percent “fully” or “partially” agreed on the desirability of “special tax incentives to business to help build up the economy”; only 28 percent opposed those incentives.
Americans, it seems, are not always reliable supporters of raising taxes on corporations. Sometimes they even support cutting those taxes.
To be sure, support for job-creating business tax cuts was never overwhelming; only occasionally did it even rise to a level that might be described as substantial. But over the decades, support for business tax reduction has been strong enough to complicate breezy assumptions that corporations are easy targets.
Yes, all things being equal, it is much easier to sell a tax increase on corporations than one on individuals. But it is also possible to push back on proposals for a corporate tax increase by framing corporate taxes in terms of “growth” and “job creation.” That framing will not always carry the day, but it can blunt the drive for tax increases.
Rosy Scenario
But what if jobs are not a big worry? What if the United States is entering a post-pandemic boom during which jobs are abundant and growth is brisk?
As we remain mired in the COVID-19 pandemic, with all its attendant economic fallout, it seems premature to imagine such a world. But projections for the not-too-distant future are generally optimistic, with the Federal Reserve suggesting that unemployment will fall to 4.5 percent by the end of the year (from about 6 percent now). Some private sector forecasts are even more optimistic.
If job creation and growth incentives are less politically salient thanks to a booming recovery, will that blunt arguments against corporate tax increases? Possibly. But it is also possible that a booming economy will dilute some of the populist anger that Democrats might otherwise harness in their drive to ensure “fair share” taxpaying by corporations.
Historically, the intertwined politics of growth, employment, and taxation have worked in both directions, sometimes boosting the case for corporate tax increases, sometimes paving the way for corporate tax cuts or targeted incentives. It is too early to know how these forces will play out during this year and next, not least because the course of the pandemic remains uncertain.
Ultimately, however, what seems most likely to make a difference in shaping the fate of Biden’s corporate tax reforms is their notional linkage with infrastructure spending. The Biden taxes aren’t meaningfully linked with the spending programs they supposedly pay for. The infrastructure spending can happen with different taxes. Or no taxes at all.
But as a matter of politics, the linkage between corporate taxes and infrastructure does matter. According to the Morning Consult poll, the infrastructure spending makes the corporate tax proposals more popular. Just as important, the taxes also seem to make the infrastructure more popular.
Asked in the early April poll if they would prefer the infrastructure package with the corporate tax provisions or the same spending package without the tax provisions, 53 percent of survey respondents chose the option with taxes; only 29 percent supported a tax-free infrastructure program.
Americans seem to like infrastructure that’s paid for — as long as it’s on the company tab.