SINCE PARTISAN anger and rhetoric are thrown at us every day, we all know that these are times of extreme political hyperbole.
There just aren’t riots; instead, insurrections. For each party, elections aren’t lost, they are stolen. Depending on your political orientation and party registration, the same House speaker, either in Concord or Washington, is either effective and a great leader, or an evil and corrupt bully. The other side’s agenda is always a danger to democracy.
So, knowing this, when I came across the recent headline, “New Hampshire Companies Will Face Higher Taxes Than Communist China if Dem Bill Passes,” my immediate reaction was probably similar to yours. I thought, well all right, taxes will go up under Democrats, but higher than the largest surviving communist country in the world? As one of our political leaders often says, “C’mon, man!”
I decided to look into it and here’s what I found: Here anyway, skepticism doesn’t trump facts. With the Democrats’ tax increases, New Hampshire’s businesses – large and small — will be paying more — a lot more — than in Communist China. The only question is, how much more.
If just the congressional Democrats’ reconciliation bill is passed, New Hampshire businesses will be at a combined federal-state corporate tax rate of 32.2% vs. China’s 25%. This will put New Hampshire’s small businesses, particularly manufacturers, at a huge tax disadvantage to Chinese competitors as they attempt to recapture business lost during the pandemic. And it is worse compared to European competitors. There, the average corporate tax rate is even lower, 19%
But the possible damage from these bills doesn’t stop there. If the Democrats’ $3.5 trillion infrastructure bill passes, then New Hampshire businesses and residents will have even higher individual income taxes, small business taxes, corporate taxes, and capital gains taxes than China and Europe. Consider an example: the combined federal-state capital gains tax rate for New Hampshire residents would be 36.8% vs. China’s 20%.
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It is tempting to say, what do I care about higher taxes? I am not rich. I am not a business. I wish I had capital gains, but first I need some capital. I won’t pay these taxes, you might think.
But, oh, you will.
A university study shows that for every dollar in higher corporate taxes, wages are reduced by 92 cents. And then, with what is left in lower wages, we as individuals will still be paying the higher corporate taxes. According to the Congressional Budget Office, local workers directly pay 70% of the higher corporate tax burden through higher prices.
Perhaps you think like Press Secretary Jan Psaki that businesses would not dare to pass on higher taxes. Unfortunately, this is just wishful thinking. Even the left-of-center Tax Policy Center estimates 20% of the burden of higher corporate taxes will be directly borne by labor in lower wages, with the rest paid from depressed investment returns (dividends, interest, capital gains: the very assets of your pension and 401(k) funds).
So, here’s what appears to be happening. Hiding behind our healthy skepticism of inflammatory political speech are the largest spending and tax increases ever. We may think the words used to describe them are exaggerations, but we will know differently if they pass. That’s when our wages will decrease, cost of living will increase, and jobs will once again flow out of New Hampshire to China and Europe. And that’s no exaggeration.
Bill O’Brien is the former speaker of the New Hampshire House of Representatives. He is chairman of Pine Tree Public Policy Institute and co-chairs New Hampshire Center Right Coalition. He lives in Nashua.