Taxin’ Talarico wants to hike Texans’ Taxes
Texas Democrat Senate nominee James Talarico wants to impose a job-killing payroll tax hike on households and small-to-midsized businesses. He also wants to impose a capital gains tax increase, a corporate income tax increase that hits workers, and a stock buyback tax that hits American nest eggs.
Talarico’s tax hikes list:
Talarico Payroll Tax Hike
Talarico vows to increase payroll taxes by removing the payroll tax cap. This would hit small-to-midsized businesses, contractors, and the self-employed especially hard.
Under current law, Social Security payroll taxes only apply on wages up to $184,500.
Talarico would hike the payroll tax on earnings above $400,000 which would impose a combined federal tax rate of 53.2% into infinity.
The math is as follows:
37 percent top federal income tax rate
12.4 percent Talarico payroll tax applied to income above $400,000.
2.9 percent Medicare payroll tax
0.9 percent additional Medicare payroll tax
= 53.2% top combined federal tax on households and businesses.
And when you add state taxes, the Talarico tax burden for many Americans will exceed 60%.
Businesses will shut down or raise prices to stay afloat.
Small business groups such as the National Federation of Independent Business weighed in against the payroll tax hike.
In testimony to congress, NFIB said:
“85% of small businesses are organized as pass-through entities for federal tax purposes and report their business earnings and expenses on their individual tax returns.”
“As a result, business income earned through pass-through entities such as S-Corps, sole proprietorships, and partnerships would be subject to these additional Social Security taxes.”
“At a time when small businesses continue to struggle with inflation, labor shortages, rising borrowing costs, and general economic uncertainty, Congress should not impose another significant tax increase on entrepreneurship and job creation.”
Talarico Corporate Income Tax Rate Hike Borne by Households and Consumers
American households will bear the burden of the Talarico corporate tax rate hike. The cost of the tax is passed on to households in the form of slower wage growth and higher cost of goods and services.
The corporate income tax is a tax on American workers. Studies show that higher corporate taxes disproportionately reduce wages for young workers, the low-skilled, and women due to significant barriers to working, like limited transportation and childcare costs.
According to the Tax Foundation, workers bear an estimated 70 percent of the corporate income tax in the form of lower wages.
They note:
“Over the last few decades, economists have used empirical studies to estimate the degree to which the corporate tax falls on labor and capital, in part by noting an inverse correlation between corporate taxes and wages and employment. These studies appear to show that labor bears between 50 percent and 100 percent of the burden of the corporate income tax, with 70 percent or higher the most likely outcome.”
Talarico’s tax hike also saddles the USA with higher taxes as we compete against China. Talarico’s corporate tax rate hike would drive American companies overseas because his tax burden would threaten their survival and their ability to create American jobs.
China applies a low 15% corporate tax rate on companies China deems “high and new technology enterprises.” These companies include Huawei, Tencent, Alibaba, Baidu and many others.
Talarico’s corporate tax rate would also increase the cost of household utility bills as the tax burden on electric, gas, and water companies is passed through directly to consumers.
Talarico Capital Gains Tax Hike
More than 30 million households have a capital gains filing in a given year, according to IRS data. Most Americans pay capital gains taxes at some point in their lives. Talarico wants Washington to take a bigger tax bite out of these households.
Talarico wants to send the IRS tax man after Americans who sell their homes, businesses, farms, or stocks.
Capital gains taxes are already too burdensome as Americans are forced to pay taxes on nominal gains rather than inflation-adjusted (real) gains, meaning households have to pay taxes on phantom “gains.”
If the government takes an even bigger tax bite under Talarico, investment in America become less attractive.
Talarico Stock Buyback Taxes on Your Nest Egg
Talarico’s stock buyback tax hike will harm the retirement savings of any individual with a 401(k), IRA or pension plan.
Stock buybacks help grow retirement accounts. Restricting buybacks would harm the 62 percent of Americans who own stock and more than 70 million workers invested in a 401(k). More than 16 million Americans are additionally invested in 529 education savings accounts.
Retirement accounts hold the largest share of corporate stocks, accounting for roughly 37 percent of the outstanding $22.8 trillion in U.S. corporate stock, according to the Tax Foundation.
American corporate employers use profits in several ways: reinvest in the business, pay down debt, pay dividends, repurchase shares, or hold onto cash. Buybacks typically occur if companies have extra cash after they account for its investment opportunities and other obligations. In that case, a dollar returned to shareholders is not necessarily a dollar that would otherwise have been invested by the company.
Further, when the company purchases back its shares, the money goes to shareholders who can then spend or reinvest it. Millions of Americans hold stocks and stock buybacks can therefore return capital to accounts and funds that ordinary workers rely on for their financial security.
Buybacks are a signal that companies are willing to reinvest in themselves. The most common rationale for a stock buyback is that a company believes its stock is undervalued, reflecting confidence about its own future.
Additionally, a willing seller is required for a company to repurchase shares. After a buyback, those sellers are now able to redirect investment toward other parts of the economy.
A buyback tax would stifle U.S. employers and put Americans at a competitive disadvantage vs. China, which does not have a buyback tax.
When India imposed a buyback tax, they became less competitive with China as noted in this piece: “Buyback Tax Makes Chinese Equities More Attractive Than India.”
Talarico cannot make Texas more competitive by making it more expensive.
Not only does Talarico want tax increases, he has voted against tax cuts. Talarico voted against an across-the-board income tax cut and against No Tax on Tips and overtime.
He opposed the Working Families Tax Cut that resulted in increased Texas household take-home pay by $7,500-$10,700.
His track record shows that he is not interested in increased affordability for Texans. In fact, his slew of tax hikes would do the opposite.
