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Testimony of Dr. William H. A. McBride,
Vice President of Federal Tax and Economic Policy, Tax Foundation
Before the Joint Economic Committee
“The Economic Benefits of the Revenue Provisions of the Build Back
October 6, 2021
Chairman Beyer, Ranking Member Lee, and members of the Joint Economic Committee,
thank you for inviting me to testify today.
I am Dr. William McBride, Vice President of Federal Tax and Economic Policy at the Tax
Foundation, and today I will share the key findings of our analysis of the most recent
iteration of the President’s Build Back Better Agenda.
There are three primary takeaways from our analysis. The first is that the corporate
tax is not just paid by corporate shareholders: raising the corporate tax rate will reduce
investment and productivity growth, ultimately leading to lower wages across the board.
The second is that further increasing the progressivity of the tax code by raising individual
income taxes for high-income earners comes with a cost: it will reduce incentives to work,
save, and invest, broadly reducing employment opportunities throughout the economy.
And lastly, the tax code is not an effective tool for social policy: optimal tax policy raises
the amount of revenue needed while creating minimal economic costs, and other goals are
better addressed through proper spending programs.
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Point 1: Raising Corporate Income Taxes Will Reduce Investment in
Raising corporate income taxes has a large negative impact on the U.S. economy, because
it reduces the after-tax return on corporate investment, reducing incentives to invest. As
investment shrinks, worker productivity declines along with wages and hiring.
Our modeling of the Ways and Means Committee’s latest Build Back Better proposal
found that the plan would reduce the size of the economy by about 1 percent in the long
run, shrink the capital stock by 1.8 percent, cut wages by 0.7 percent, and cost more than
300,000 jobs.1 While t