Apparently unaware of basic economics, White House press secretary Jen Psaki stated Monday that the White House believes it is "unfair and absurd" if businesses raise prices in response to the Biden administration increasing corporate tax liability.
What did Psaki say?
For several days now, the Biden administration has been pushing the absurd claim that its $3.5 trillion spending bill actually "costs zero dollars." They argue that tax increases will offset spending.
Biden has promised not to raise taxes on American households earning less than $400,000. But as a reporter noted in questioning Psaki during Monday's White House press briefing, analysis from the Joint Committee on Taxation says the spending bill would result in tax increases for "more than 16% of taxpayers."
When asked whether Biden would seek changes to the spending bill to maintain his promise, Psaki noted how terrible the White House thinks it is for corporations to offset government-imposed tax increases by raising prices to cover the difference.
"The president's commitment remains not raising taxes for anyone making less than $400,000 a year," Psaki said.
"There are some — and I'm not sure if this is the case in this report — who argue that, in the past, companies have passed on these costs to consumers. I'm not sure if that's the argument being made in this report," she continued. "We feel that that's unfair and absurd, and the American people would not stand for that."
What is the truth?
Basic economics demonstrate that corporations often increase prices to cover higher taxes or forced wage increases.
In fact, contrary to the White House's claims, someone is always on the hook for increased corporate taxes. "It is important to remember that corporate taxes must be paid by people. Any corporate tax increase will be paid by either shareholders/owners, employees in the form of lower wages, or customers in the form of higher prices," Forbes reported.
That fact aside, the Wall Street Journal explained why the $3.5 trillion spending bill neither "costs zero dollars," nor raises enough revenue via tax increases to cover its cost.
From the WSJ:
In the real world, Congress's Joint Committee on Taxation says the bill raises $2.1 trillion over 10 years. Somebody must be paying more. Among the tax hikes are a 5.5 percentage point increase in the corporate income tax rate that will be paid by workers in lower wages, consumers in higher prices and investors in lower returns. Though they'll be pleased to know this all adds up to "zero dollars."
As for the spending, the $3.5 trillion figure that Bernie Sanders considers a "compromise" doesn't even capture the full cost of what Democrats are proposing. As we explained Friday, that amount is based on budget gimmickry including entitlement phaseouts and phase-ins, and the real cost will be at least $5 trillion, probably far more.
So even after $2.1 trillion in tax hikes, the entitlements in the reconciliation package that include the child allowance, college tuition, national pre-K, universal child care, expanded Medicare and a new Medicaid program will add to the U.S. debt for decades to come.
The Committee for a Responsible Federal Budget estimates the net cost of the "Build Back Better" agenda is more than $4 trillion over the next 10 years.
The Congressional Budget Office, which conducts economic analysis on legislation, has not yet scored the $3.5 trillion spending package.