Mike Huckins, Vice President of Public Affairs, Greater Phoenix Chamber
Arizona, like the rest of the county, is rebounding from the devastating effects of the pandemic. But tax increases proposed by the current administration threaten to disrupt the recovery, hurting Arizona job creators and families.
The President’s recent budget proposal includes $3.6 trillion in tax hikes. While the administration states that the tax increases will only hit big corporations and the rich, the unfortunate reality is that the proposed tax increases will be paid for by workers and families through lost jobs and lower wages. Experience shows that the damage from higher corporate tax rates is borne overwhelmingly by workers. Arizona consumers can expect to see higher prices and even higher utility bills as companies are forced to pass along the cost of these increased taxes.
Raising the corporate tax rate from 21% to 28% will directly hurt businesses of all sizes, their employees, and consumers. If the corporate tax rate were increased to 28%, Arizona companies would face a combined state and federal rate of 31.5% – more than 6.5 percentage points higher than China and significantly higher than the weighted Organization for Economic Co-operation and Development (OECD) average, making it harder for Arizona manufacturers to compete with foreign companies. On top of that, under this budget proposal, companies headquartered in Arizona would face higher U.S. taxes on global income.
The burden of these tax hikes will fall hardest on small business, as the overwhelming majority of c-corps are small businesses, with 84% having fewer than 20 employees. In total, this tax hike would hit more than 31,000 Arizona employers, including 21,000 small businesses with fewer than 500 employees. Many of these businesses are just now beginning to recover from the pandemic. Sudden and substantial tax hikes would significantly hinder continued economic recovery and put Arizona and its businesses at a severe competitive disadvantage.
Our membership is comprised primarily of small businesses. Nearly 60% of our companies employ less than 50 people, many of whom have expressed serious concerns about these tax increases. These are companies who went above and beyond to keep people employed throughout the pandemic and are now concerned that they will have to make devastating cuts to their workforce, severely limiting their ability to grow.
The President’s proposed tax hikes also threaten investment in Arizona start-ups and growing businesses. The proposal doubles the tax rate on capital gains, hitting approximately two-thirds of capital investment in the United States. For some Arizona investors the combined state and federal tax rate would exceed 50%.
The bottom line is that these tax increases aren’t pro-growth or pro-job policy and will significantly hinder our economic recovery. I encourage my fellow Arizonans to join me in contacting their representatives and telling them not to raise taxes that will hurt small businesses, workers, and families.