During his State of the Union address, President Joe Biden showed that when it comes to taxes, he is playing a game of yards, because companies, in his view, simply make too much money. He’s moving the ball down the field, slowly but surely.
In his “Finish the Job” speech, Biden ran right up the middle of investments set aside by workers who for decades thought they had made wise decisions on their own retirement plans.
Biden, by threatening to add even more corporate taxes, could harm the investments of tens of millions of Baby Boomers, Gen-Xers, Millennials, and Gen-Zers.
Of course, the president promised that Americans making less than $400,000 will not have to pay a penny more in taxes under his plan. But this is a head fake. A tax on corporate profit is a tax on retirement income.
The federal treasury has already collected $1.03 trillion in fiscal year 2023 from individual and corporate income taxes. But it’s never enough. The U.S. government has spent $1.45 trillion in fiscal year 2023, which is $17 billion more than the year before, give or take a few hundred million.
Of the corporations whose money he yearns for, Biden said, “they used those record profits to buy back their own stock, rewarding their CEOs and shareholders. Corporations ought to do the right thing. That’s why I propose that we quadruple the tax on corporate stock buybacks to encourage long-term investments instead.”
The right thing? The right thing is maximizing profits to shareholders, who Biden singled out for criticism, as if there is something immoral about being a shareholder.
Who gets those profits that Biden says are too much? Your grandmother. Your mom and dad. Bus drivers, pilots, engineers, nurses, and machinists. Those dividends go to all of us who were told back in the 1970s that, since pensions were not sustainable, and since Social Security can’t guarantee us anything but an impoverished old age, we needed to start building these new-fangled investment instruments created by the government, we needed to invest in America, and we were encouraged to turn straw into gold during our working years.
Corporations are owned by shareholders, big and small. Take Exxon, for example: Nearly 34% of the company is owned by mutual funds, 26% by other institutional funds, and less than 1% by individual stakeholders.
Corporate profits go into earnings account, and a company’s board of directors makes the decisions about how to distribute those profits to shareholders, which are made up by pension plans, 401Ks, individual retirement accounts, and other financial vehicles. Exxon and other profitable energy companies that Biden has declared war on, pump billions of dollars into pension plans and retirement accounts every year.
The plans Americans are invested in are taxed based on complicated calculations that change over time and depending on a person’s wealth profile. For most Americans, distributions are taxed as ordinary income, and so they may pay the average of 28.4% on that income. The federal government is, without question, skimming its share through taxing this retirement income as it reaches its final destination – your bank account.
In a stock buyback, a corporation can buy its own shares, which may or may not boost the price of the shares still outstanding. This idea that it drives up the stock price is a theory that is much debated. Until Biden signed the Inflation Reduction Act, those stock buybacks were not taxable until investors sold the appreciated shares. Retirement accounts benefited, as their account values grew, and America as a whole benefited from having people with disposable income in their later years.
Then, with the stroke of his pen, Biden signed the Inflation Reduction Act that makes corporations making more than $1 billion a year pay a minimum tax rate of 15% plus a 1% excise tax on stock buybacks, effective as of Jan. 1, 2023. Biden brought the U.S. in-line with the Global Tax Agreement signed onto by countries to stop companies like Apple from setting up their headquarters in tax havens.
This was only Biden’s starting offer. Now he intends to quadruple the stock buyback tax. What will Biden go for next? Whatever it is, he is desperately looking for more cash to pay for the massive government expansion he has planned. It’s a game of yards, and retirement accounts are going to be collateral damage in Biden’s “Finish the Job” initiative.
Of course, there’s some kabuki theater in the corporate tax enacted under the Inflation Reduction Act. Most U.S. corporations already pay more than 15%. Those that don’t will figure out creative ways to adjust their earnings downward.
Taxation changes corporate behavior, but rarely in the way that government intends. The devil is going to be in the details, and tax details seem to get more complicated with every tax law passed.
With stock buyback taxes, we can expect a behavior change as corporations move to dividends, which could transfer the individual income tax base from capital gains to dividends, according to the Tax Foundation. That could mean a tax between zero and 20%, depending on a person’s taxable income and other factors. For most, the taxes on non-qualified dividends is the same as the usual income tax bracket.
This corporate tax increase proposal is one Biden blunder that would definitely “Finish the Job” on the workers of America because this is a trickle-down tax if there ever was one. Retirees will take the hit.
Suzanne Downing is publisher of Must Read Alaska.
He knows. He doesn’t care. Liberals being compassionate is the biggest con of all.
More dead means fewer carbon footprints, and potentially more space for his illegals.
Yup, you nailed it. Democrats want to kill people to make room for illegals. Such a solid opinion based on unlimited evidence… because illegals have no carbon footprint apparently. How do you come up with this stuff.
Even democrats, dull as they are, realize the whole carbon footprint thing is fake. No, they just want the millions of beholden voters to replace and/or outnumber the legal citizens. It’s always about money and power. Always.
I think to a decent sized minority of them, they have bought their own con. They really believe.
One of the constants of humanity is the fundamental need to believe in some kind of god. Since so many of the hard left are hostile to traditional faith, the turned the climate con into an actual faith.
The constant here is folks who need to apply THEIR perception of god to those different from them.
And don’t look for the GOP to do a damn thing about it. They feed from the same trough.
It is virtually guaranteed, when Joe Biden says, “Finish the Job”, he is thinking of “the job” that has been done by the vaccines, and is currently being done with geoengineering, and every other sundry method that can be used to destroy not only this nation, but its people. The talk of taxes is just a complicated and effective ‘look here instead of there’ distraction.
Bulls eye Suzanne
Of course. As President Trump respectfully understated “Joe Biden is not a very nice man”. Thank you democrats.
Your “A tax on corporate profit is a tax on retirement income” doesn’t hold water. Few less than rich retirees hold equities with SS being the majority of their incomes in retirement. Granted a few Alaskans have lost their defined benefits plans for retirement being replaced by a 401k or similar plan, they may or may not include equities in their plan.
Billy you can’t say that because you really don’t know how this will shake out. One thing is known if Biden wants it it is not good for the masses. Maybe your government pension will take a hit I sure hope so because I want you and your lefty friends to feel the burn.
You worried about my SS Mark? Tough noogies to you.
No not worried at all. Just telling you the truth. Still using fossil fuel there billy.
Tough noogies to you
What’s your truth Mark? Is that like Trump’s alternative truths? Heheh!
Mark-you military or have family members in the military? Some serious government benefits there.
What’s your point? This discussion is about freedom of choice not the feds telling me what I can or can’t do. Besides most of the military doesn’t get the same benefit’s as the public union workers and politicians.
Over 55% of Americans are invested in the market, either individually or more likely, through private or government pension plans. Biden’s tax plan will hurt the majority of Americans to feed insatiable government spending.
In 2022 Gallup reported that 58% of Americans owned Stocks and the percentages owning stock range from highs of 89% of adults in households earning $100,000 or more and 79% of those with postgraduate education to a low of 25% of those in households earning less than $40,000.
Of course none of that says a thing about retirees Dan.
Our government subsidizes corporations who manufacture unhealthy foods through SNAP creating obesity which taxpayers get hit again on the back end through Medicaid and Medicare. The capitalists laugh all of the way to the bank and use subsidized profits on stock buybacks. Simply getting rid of tax loopholes and limiting SNAP to fresh healthy food would lower deficits without increasing corporate taxes. Of course lobbyists insist eliminating carried interest that benefit the wealthy is a tax increase and push a VAT which is a hidden tax increse on everyone
Excellent article. Like all politicians Biden has never met a tax he didn’t like. Just like our state the federal government needs to look at ways to reduce expenditures instead of raising taxes.
Those oil corporations made historical high buck from THEIR inflated prices that went to shareholders.
Your support of these corporations being a part of retiree pension plans says you are happy making buck off people who can barely get their kids to school and themselves towork because of those high gas prices that a few good returns on.
I hear you.
Maureen you need to study economics because if you did you would know that the commodities market sets the price not the oil companies. If you want to talk about excessive profits you should really look at doctors lawyers and banks. I would ask you like I did bill yankee are you using fossil fuels? Then stop nobody says you have to pay for them. Let’s complain about the real reason prices are so high and surprise his name is your buddy Biden.
Commodities Market doesn’t set Alaskan Oil prices Mark. So you start off with bullchit and then finish your screed with just BS politics. Get a grip as you’ve got nothing to say IMO.
Billy your are right you’re full of it. Oil is traded on the commodities market and the worlds oil prices are tied to that. My grip is fine as yours is slippery. Still never answered the fossil fuel question you Hypocrite. Your so easy to find fault with keep up the bad work billy
Tell us about heating oil Mark. Crude is hardly marketed to consumers.
Gasoline and diesel fuel are not commodities either. Tough noogies to you Mark.
Billy billy you look so knowledge starved. What part of the cost for a barrel of oil to make all other fuel products don’t you understand. You really need to sue your school for the lack of an education. All byproducts of oil are priced like everything else they take the coat of the product then adjust the price after making the product. Very simple maybe you can get some of it. Besides like I have told you sense you use these products pay up as your man in charge has raised your price not the oil company’s. Get a life billy your loosing right now hahaha
OK Mark try explaining how the costs for heating oil in Alaska are in the neighborhood of $5/gallon when heating oil commodities have dropped from over $4.50 to around $2.87 without the slightest budge in Alaska.
You could also attempt an explanation of why Alaskan prices of gas/diesel at the pump doesn’t show the similar drops that crude prices have shown yet those prices at the pump are reflected in down South prices.
Got your money in oil, right?
And you use oil so what’s your point? Looking kind of ridiculous are we Maureen?
Maureen and billy you both really need to see the real world instead of cherry picking your talking points without the full picture. Don’t worry I will give you a pass as you both support the worst so called leader we have ever had.
To bad so sad for you
What about the medical industry’s profits and the banks no comment on those rip offs who are not commodities.
Really well written piece. Unfortunately a lot of people don’t understand what you plainly laid out here.
What else does that demonically inspired demented old worn out idiot think he can bleed us of? (and I’m trying to be polite in my pejoratives…). Seeing him on TV without hearing what he has to say makes me ANGRY. Idiot has already ripped me off for $1/2M and now this old man has to look for work. Brandon is a sold out Chinese spy handing us over to the chicom dream of world domination. d’rats!
Corporate tax cuts and stock buybacks primarily benefit the 50% that own stock. To level the playing field eliminating carried interest, subsidies, and write-offs would benefit the economy by lowering wasteful spending without tax increases. Social security can be stabilized without age or tax increases by means testing. Limiting spending to growth to less than GDP growth would eventually bring a more balanced budget. These options were all documented by Simpson Bowles
Retirees for the most part are the ones least of all likely to be supportive of the new dogma. Of course we are the target. And those who have nothing have nothing to loose, so nobody is too concerned about those of us who worked and saved all of their lives. In their minds, the government will take care of them if they ever get old. Won’t be around to see how it works out for them.
Retirement plans also invest in stocks. So this hits any retirement plan, period. It really looks like the democrats have earned their nick name as the “tax and spend” party. Only now they will take your money to pay reparations to buy votes and import more illegals to also buy democrat votes. As usual, it is all about power. And yes, as a recovered democrat, they really do believe that baloney. Thank God I went back to school and completed my business administration degree. It really opened my eyes.
I don’t have oil in my plan, that I am now living off. I did that purposely a long, long time ago.
But your using it and complaining about it so you look foolish.
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