MEMO

To: Republican Study Committee members

From: Chairman Jim Banks
Date: April 1st, 2021
Subject: Democrats’ Plan to Raise Taxes & Hurt American Families

Democrats’ Plan to Raise Taxes & Hurt American Families

Topline Messaging:
Americans wondered all year as Congress passed trillion dollar after trillion dollar spending pack-
age... just how are we paying all this?
It’s a good question. As always, unless we continue adding to our national debt, we have two op-
tions: Decrease spending or increase revenue a la taxes!

Conservatives favor decreased spending—that’s why the RSC is working hard as we speak to write
up a balanced budget (more on that later).

Democrats, on the other hand, love to raise taxes! And we learned this morning that’s exactly what
Joe Biden plans to do...

Even in the midst of crushing job losses due to the government’s response to the pandemic, Demo-
crats still want to raise your taxes. You can’t teach an old dog new tricks!

The RSC has broken down for you everything that’s coming that will place a further financial bur-
den on your constituents and families across America.
Tax Increases in Biden’s “Made in America Tax Plan”
President Biden outlined over $2 trillion in tax increases as part of his Made in America Tax Plan.
These were released March 31, 2021 as a way to fund his American Jobs Plan, a $2 trillion trojan
horse presented as an infrastructure package that harbors socialist and Green New Deal priori-
ties.

Tax Hikes and No Jobs Plan – Biden has proposed increasing the top corporate tax rate from
21% to at least 28%, higher and more punitive than that of Communist China (25%), higher than
the world average of 23.85%, the European average of 19.99%, and close to the highest regional
average on Earth, 28.5%. Biden’s business tax changes would make American one of the worse
places to do business. These policies would serve to stifle domestic innovation and job growth,
bolstering our global competitors. These policies would exacerbate the transfer of jobs and
manufacturing to Communist China, which would then have a more competitive tax code than
ours.

Doubling Down on the Double Taxation of Investments and Savings – President Biden would
implement a minimum tax of 15% on book income. A book income tax ignores the necessary
costs of equipment, structures, R+D and other items essential to economic production. A book
tax, purely and simply, forces a double tax on the investments and savings used for a company’s
future growth. Biden’s plan offers this tax as a way of ensuring that U.S. businesses tax rates
more than double. The burden of which will be felt in the paychecks of American workers. This
incentivizes against job growth, long-term planning, and innovation. These anti-competitive pro-
visions would work to send millions of jobs overseas, especially to China.
Promoting Chinese Economic Development and IP Theft – Biden would transform internation-
al taxation in a way that would apply triple taxes on the international and cross-border operations
of American businesses. This would lead to more American household spending going to foreign
producers. Biden’s plan would effectively repeal the TCJA’s treatment of Global Intangible Low-
Taxed Income (GILTI) and Foreign Derived Intangible Income (FDII) and limit foreign tax credits.
The Biden plan would subject these operations, in full, to double taxation from both the federal
government and foreign governments. His plan would, essentially, triple tax all investment spending
by American businesses for international operations. These misguided policies would tremendously
increase incentives for U.S. companies to eventually move all their operations overseas, taking their
investments, contributions to employment, wage payouts, and IP to foreign nations. This would like-
ly result in increased manufacturing in China which could aid their current efforts to steal American
IP. Furthermore, these policies would penalize U.S. companies that want to bring raw and interme-
diate inputs to the U.S. to bolster U.S. heavy manufacturing. Biden’s plan would, shamelessly, re-
ward foreign companies for dumping products into U.S. markets while taxing American competitors
of these companies out of our own market.

Exporting Socialistic Tax Policy – In this plan, President Biden has stated his intent to strongly
encourage other nations to increase their business tax rates and to establish so-called minimum
businesses taxes. These minimum taxes would bake in double and triple tax layers on global invest-
ments and savings, stagnating global economic growth. These tax hikes would have the effect of
doubling down on the harm to Americans from Biden’s tax proposals. They would lead to a decline
in U.S. exports and job creation.

Killing Affordable Energy Producers – Biden would deny fossil fuel companies of certain normal
tax deductions. He would impose a new regime of taxation on companies he deems to be polluters
in order to fund his green agenda. These taxes would strike at the heart of the U.S. economy and
would result in job and wage level losses across the economy.

Additional Proposals from President Biden and Congressional Democrats:

President Biden and Congressional Democrats have voiced support for enacting other damaging tax
increases. While the following changes were not listed in Biden’s Made in America Tax Plan, it should
be noted that the plan states President Biden will be putting forward additional tax changes in the
coming weeks.

Assault on the Middle-Class – President Biden and Congressional Democrats have repeatedly
stated they want to repeal the Tax Cuts and Jobs Act (TCJA), which led to 50-year low unemploy-
ment rates and provided tax cuts to roughly 90% of middle-income families. Repealing the TCJA
would hurt families by cutting the child tax credit in half and make filing taxes more complicated
and expensive for most Americans. Biden has called for increasing the top marginal tax rate to
39.6%, while some Democrats want it increased by another 10 percentage points, effectively im-
posing a higher tax burden on many small businesses. The implementation of Biden’s proposed tax
hikes would kill over half a million jobs, according to the Tax Foundation, and increase taxes by $3.3
trillion (just shy of $27,000 per American household). Though many of the Left’s proposed tax hikes
focus on companies, these taxes and the damage they do to the economy are felt in the paychecks
of working Americans.

Shuttering Main Street – President Biden has said he wants to phase out Section 199A for small
and mid-sized businesses making $400,000, or more, per year. Section 199A is a TCJA provision that
reduced taxes for legions of small and mid-sized businesses, allowing expansion and job creation.
Biden would also limit the value of deductions that can be claimed on itemized returns, in a way
that would harm the same businesses. This would impose a double tax on the cost of doing busi-
ness for many pass-through small businesses. Democrats would, for certain small and mid-sized
businesses, repeal Sec. 1031 like-kind exchanges. This section allows people to swap real estate
holdings without generating an erroneous tax payment in-between. This provision is essential to
many family farms and small businesses. These provisions would pull the rug out from under our
small businesses and would empower large monopolistic companies to push them aside and cor-
ner markets.

Implementation of the Green New Deal – Democrats have made it clear that they view their mas-
sive tax hikes as a means to pay for parts of their radical environmental reforms that would destroy
our economy and throw millions into poverty. Biden has voiced his intent to expand tax credits to
green energy producers, create carbon taxes, and hikes fuel taxes. A carbon tax alone could cost
more than one million jobs and over $1 trillion dollars of lost income each year by 2030.

Death Tax Hike – Biden’s has said he wants to reverse an important TCJA reform by reducing the
estate tax exemption from $11.7 million to just $3.5 million. He would also eliminate the step-up basis
for assessing these taxes. Estate taxes act as a triple layer of taxation on the work of generations of
Americans. According to the CBO, estate taxes act just like an increase in income taxes. Estate tax-
es clobber small businesses and family farms that are passed from one generation to another, since
large corporations have more tools to avoid the impacts of death taxes. Another Democrat proposal
would almost double the top death tax rate from 40% to 77%.

Bailouts for High Taxing and Spending States – President Biden and congressional Democrats
have stated their desire to restore the pre-TCJA State and Local Tax (SALT) deduction that, effec-
tively, forces low-tax states to subsidize over-taxation by liberal states.

Hiking Duplicative Income Taxes and Killing Investment – Biden has proposed dramatically
increasing taxes on some long-term capital gains by making the top effective rate 43.4% (39.6% in-
come tax plus a 3.8% surtax). This plan ignores the fact that capital gains taxes often impose a third
round of taxation that occurs after the corporate income tax and individual income tax. Congressio-
nal Democrats have also proposed a new economically damaging wealth tax. These proposals are
naked attempts to grab money for pet projects in a way that will stifle investment, entrepreneurship,
and job creation.

Killing Investment and Saving - Democrats would allow TCJA provisions to expire that allow for
full and immediate expensing of equipment and R+D costs. These deductions are not carve-outs,
but rather prevent job killing double-taxation on the dollars companies use to grow their companies
(investments and savings). These funds can then even be taxed a third time through estate taxes.
These multiple layers of taxation on investing and saving increase total effective rates of taxation,
leading to slower economic growth.

Democrat Plan for Social Insecurity – Despite calling for increased Social Security taxes, the
Democrats’ proposal would start running deficits in 74 years and fail to prevent Social Security from
ultimate bankruptcy. This tax hike would reduce overall U.S. wage levels by 3.9% in the long-run,
$1,300 annually for an average worker today. If this proposal had already been in law 40 years ago, it
could have reduced the assets of a newly retired American by $100,000.

Promoting Monopolistic Consolidation – Democrats have floated financial transaction taxes that
would significantly impede capital flows and stifle investments, sapping retirement savings, and
starving start-ups and small businesses of funding, allowing the expansion of large monopolies.