How Christians can think biblically about Biden's economic plan
The discussion around minimum wage and corporate taxes is heating up as lawmakers work on getting policy through Congress. How can Christians think biblically about these issues?
When President Biden unveiled his $2.2 trillion infrastructure plan in March, and details became public knowledge, it became clear that raising taxes was a central goal. To his credit, Candidate Biden said he would raise taxes, and now President Biden seems poised to do just that. At least he kept his word.
The current proposal would raise the corporate tax rate from the 21% rate introduced by former President Trump to 28%. The proposal would also impose a minimum 15% tax on book income for large multi-national corporations. This proposal found support from Treasury Secretary Janet Yellen, who recently called for a global minimum corporate tax rate and an end to “tax competition.”
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Critics criticized. Fans cheered. And, amazingly, many of those fans happen to be Christians. But should Christians be rejoicing in the raising of corporate taxes and the possible implementation of a global tax?
Christians with any experience in political discussion inevitably address the issue of taxation. And we are familiar with the biblical command to pay taxes (Rom. 13:1-5) and be exemplary citizens in our communities. The account of Jesus and the image on the coin (Matt. 22) reveals that governments have the ability to tax and Christians should be obedient in paying those taxes.
And we are reminded in the Old Testament that the taxing power of the government is a warning to those that wish to have a king rule over them (1 Sam. 8:10-18). These warnings and commandments, however, don’t speak to the rate of taxation. We don’t get any input from sacred Scripture on the level of taxation and whether there is a moral imperative tied to taxation. This is a good issue to think through as we consider the corporate tax rate. But Christians are far more familiar with notable verses on taxes and wages than they are with real-life economics. The practical application of Scripture to real economics is not easy, and knee-jerk (often emotional) reactions do more harm than good.
That taxes exist is undeniable. That governments have the authority to tax is equally undeniable. At what rate a government should tax the economic producers is another story altogether. President Biden wants to increase taxes on the economic producers of the country; the people that stimulate the economy through the means of the production of goods and services. While we tend to think about massive corporations like Amazon and Wal-Mart when talking about “corporate” tax rates, the reality is that this would impact both large and small businesses. Many assume that raising corporate tax rates would simply cause corporations to pay their “fair share” of taxes and little else. Is that all it would do?
The negative results of raising corporate taxes extends beyond a company simply paying more tax on revenue. The long-reaching results include a higher cost for global companies to work with American companies; a reduction in output, a reduction in earnings leading to a reduction in dividends and interest on stock, and a loss of jobs. A recent article at the non-partisan Tax Foundation details some of the likely results of increasing the corporate tax rate:
“An increase in the federal corporate tax rate to 28 percent would raise the U.S. federal-state combined tax rate to 32.34 percent, highest in the OECD and among Group of Seven (G7) countries, harming U.S. economic competitiveness and increasing the cost of investment in America. We estimate that this would reduce long-run economic output by 0.8 percent, eliminate 159,000 jobs, and reduce wages by 0.7 percent. Workers across the income scale would bear much of the tax increase. For example, the bottom 20 percent of earners would on average see a 1.45 percent drop in after-tax income in the long run.”
Add to the mix an increase in federal minimum wage to $15 an hour and small and medium-sized businesses are looking at a catastrophic scenario that will result in lost jobs, higher unemployment, and an economic recession. It has been reported that after New York City raised minimum wage to $15 an hour, more than 75% of restaurants reduced employee hours to close the revenue gap and 36% of restaurants let employees go to keep the doors open. And that’s just the effect on the restaurant industry. The broader effects of a drastic wage increase were reported as follows:
- 1.6 million job losses—57 percent at small businesses (those with fewer than 500 employees)
- 700,000 job losses at the smallest firms (fewer than 100 employees)
- 165,000 job losses in the restaurant industry
- 162,000 job losses in the retail trade industry
- Nearly $1 trillion reduction in real GDP in the US economy
If businesses are hit with the double whammy of higher corporate taxes and a $15 federal minimum wage, the result will be a loss of jobs, less hiring, inflation, and movement towards another recession. This is not a political statement, it’s purely a black and white basic economics (numbers) statement.
Christians often say they are trying to “love their neighbor” by fighting for higher minimum wage. But what will they say to their friends, neighbors, and church members who lose their job and potentially have to uproot their lives just to find new work?
If Christians truly have a heart for economic equality and better wages, they would do better to understand economics and the real impact decisions by the federal government have on the lives of everyday Americans. Wanting to make the rich pay “their fair share” is not a rally cry worth our time. Understanding the actual policy steps we can take to improve the lives of those around us would be a far better cause.
Nathan Cherry is a financial advisor specializing in personal financial management and debt reduction. After more than a decade in church ministry, Nathan found a place for his talents in money management in the financial services industry working for a respected financial planning firm. Nathan also writes on social and moral issues at www.nathancherry.com.
