Democrats are denying basic economics

Reason's Peter Suderman writes, "Democrats in Washington... have argued that their policies do not or should not have any costs whatsoever.

Just this week, for example, White House press secretary Jen Psaki responded to a question about the tax impact of the $3.5 trillion spending plan now working its way through Congress by declaring that 'there are some…who argue that in the past companies have passed on these costs to consumers…we feel that that's unfair and absurd and the American people would not stand for that.'

Democrats have developed a habit of denying basic economics in order to promote their policies https://t.co/67vjNilQ24

— reason (@reason) September 29, 2021

When taxes are raised on corporations—the 'companies' in Psaki's response—corporations often respond by passing that tax on to others. In some cases, they pass costs to consumers. In others, as the Cato Institute's Scott Lincicome wryly notes on Twitter, they reduce the amount they would have otherwise spent on wages. They have to pay more to do business, and so they make adjustments accordingly. Costs create consequences and tradeoffs.

Empirical research has consistently shown that a large portion of corporate tax increases is actually paid by labor down the line. There are some reasonable academic debates about the precise percentage of the tax paid by labor, and how that might change under certain circumstances. But there is little real debate about whether or not some of the costs are passed on. The point is that it happens. Workers, not owners, pay at least some share of higher corporate taxes.

Yet Psaki's position—the Biden White House's position—is that this sort of thing is 'absurd and unfair."

Read the entire column.