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Execs Foresee Corporate Tax Hike Regardless of Election Outcome

Posted on Sep. 16, 2020

Over two-thirds of respondents to a survey targeting corporate executives said they expect business tax rates to rise no matter how the 2020 election unfolds.

In a PwC survey released September 15, 70 percent of respondents said they expect rates to go up because of federal costs associated with COVID-19 relief, with 35 percent expressing strong agreement that rates will increase.

“There is a clear consensus in the business community, with the amount of stimulus that has been invested both here in the United States as well as across the globe, given the pandemic . . . that taxes and tax controversy will rise,” said PwC U.S. Chair Tim Ryan on a press call.

The finding comes less than a week after Democratic presidential candidate Joe Biden said in a CNN interview that he would enact corporate tax increases on “day 1” of his presidency. Biden has proposed an estimated $4 trillion in tax increases on corporations and wealthy Americans.

A divided Congress may bring good news for business owners hoping that the corporate rate will remain at 21 percent. The corporate rate was reduced from 35 percent by the Tax Cuts and Jobs Act during President Trump’s term.

“If Biden is elected, chances for a significant tax overhaul will hinge on whether Democrats take control of the Senate while also retaining control of the House,” according to the survey. “A continuation of divided government is likely to create challenges for either candidate to see their campaign tax proposals enacted.”

Rohit Kumar of PwC’s Washington National Tax Services said on the press call that he was surprised that executives expect business taxes to rise regardless of election results, adding that he doubts that if Republicans maintain control of the Senate, Majority Leader Mitch McConnell, R-Ky., would be open to an increase in federal corporate taxes.

“I think executives are understandably reacting to the historic amount of deficit spending that COVID-19 has generated, so it’s sort of natural to assume that businesses will be asked to help shoulder the burden,” said Kumar, adding that that might eventually be the case. “I think so long as we have a divided government, the odds of significant business tax changes at the federal level remain pretty remote.”

In the energy, utilities, and mining industries, 50 percent of executives surveyed said they strongly agree that business tax rates will rise despite election results, compared with 29 percent of consumer market executives.

Protectionism Rising

Ryan explained that over the past several years, he’s seen an increase in controversy tied to a protectionist, “take care of your own” sentiment among U.S. and foreign companies that isn’t directly originating from the COVID-19 pandemic but is amplified by it.

“The reality is all across the globe we have seen the rise in protectionism, which means that foreign companies, not just U.S. companies . . . are being challenged more than they ever have been before” in terms of whether they’re “paying their fair share,” said Ryan, adding that the OECD has put a spotlight on the need for transparency.

The PwC survey combined results from 578 C-suite and other executives. It showed that 95 percent of those surveyed believe that some type of fiscal pandemic-related policy action is needed for the U.S. economy, and that just 20 percent think their own business needs no further fiscal policy support.

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