According to the White House’s fact sheet, the administration’s proposed American Jobs Act envisions $2+ trillion of spending would be paid for over the next ten years by increasing taxes paid by corporations. We could do better.

To set the stage, in 2020, corporate taxes represented about 7 percent of federal tax receipts, accounting for approximately $264 billion. With this figure as a starting point, to fund the anticipated expenditures under this proposed act, annual corporate tax receipts would have to nearly double during the next decade. To generate this amount of tax revenues, the plan calls for increasing the corporate tax rate from 21 percent to 28 percent. The proposed bill would also mandate the imposition of minimum taxes to plug gaping loopholes that currently allow both domestic and multinational corporations to pay either no taxes or considerably less than the amount prescribed by the statutory corporate rate.

It’s a bit of a mystery to me how these loopholes have persisted for so long — particularly the provisions that have incentivized companies to move operations abroad, producing the double whammy of lower domestic tax receipts and also job losses here at home. Why has it taken the consideration of the Jobs Act to finally address these adverse but totally predictable tax incentives that have been codified in US tax laws for years?

I definitely favor raising taxes to fund the spending initiatives of the American Jobs Act; but at the same time, it seems to me that targeting corporations to foot the bill reflects an expedient choice, as opposed to a principled one. The planned spending projects under this proposed legislation will broadly benefit virtually all elements of our society. Sticking the corporate sector with the tab doesn’t seem to be exactly fair. Admittedly, affected companies will pass along at least some portion of the burden to their customers and suppliers through price and cost adjustments, but still…

In my judgment, by assigning these costs to corporations, the architects of the plan have selected a suboptimal funding source that largely ignores the taxpayers among us with the greatest capacity to accommodate to higher taxes — i.e., the highest income and wealthiest households. This population could be targeted by a variety of alternative adjustments to the tax code.

Here’s my top five: (1) institute a wealth tax, (2) raise estate and gift taxes, (3) add additional, higher marginal tax rates on personal income taxes at higher income levels, (4) impose greater progressivity for tax rates on dividend income, ultimately taxing this dividends as normal income beyond some threshold amount, and (5) eliminate the special carried interest tax treatment enjoyed by hedge funds — a treatment that nefariously mischaracterizes fee income as capital gains and thus inappropriately taxes this income at a lower rate than “normal” income.

I applaud the Biden administration for seeking to tackle some of the imperfections of the tax laws with respect to corporate taxation, but their revisions simple don’t go far enough. A more extensive revision of the tax code is required — one that would add additional revenues to federal coffers and also mitigate the wealth and income disparities that have become increasingly exaggerated over recent years. Through some combination of luck, hard work, and the advantages of living in America, those who’ve achieved a level of financial security that extends well beyond their current generational requirements can afford to bear greater responsibility to pay it forward. Now is the time to call upon them to do so.

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