Former tech CEO Carly Fiorina ran for president in 2016 as a small-government Republican. Four years later, she’s comfortable with Democrat Joe Biden’s social-spending plans, and the higher taxes needed to finance them.
“Not all taxation is bad taxation,” the former Hewlett-Packard CEO said at the Oct. 26 Yahoo Finance All-Markets Summit. “This issue is, is the level of taxation reasonable? And for what purpose are we taxing? And I think what Joe Biden has proposed is certainly a reasonable level of taxation on corporations and on those individuals making over $400,000.”
Biden is proposing a range of new programs on affordable housing, health care, climate change, infrastructure and child care. He’d pass around $2.4 trillion in new tax hikes over a decade to help pay for his agenda. He’d raise the corporate tax rate from 21% to 28%, and raise income taxes on households earning more than $400,000 per year, among other things.
Some business operators worry that higher taxes would cut into growth and hiring. But the corporate tax rate was 35% from 1993 to 2017, a period that included the boom of the late 1990s and the recovery from the Great Recession starting in 2009. The corporate rate fell to 21% in the tax-cut law President Trump signed at the end of 2017. That law also cut individual tax rates for most workers.
The Trump tax cuts remain unpopular, however, because many Americans feel they favor businesses and the wealthy too much, with only modest savings for the middle class. Various analyses support that view. The law, for instance, lowered the annual tax bill of the top 1% of earners by about $51,000, while the savings for a middle-class family were only about $930.
‘It’s all about Trump’
Fiorina, who ran against Trump as a Republican in 2016, endorsed Biden earlier this year. “In the Trump Republican party, it’s all about Trump,” she said at Yahoo Finance’s All Markets Summit. “We are not asked, as citizens of this country, to pledge allegiance to a party, and we’re certainly not asked to pledge allegiance to a president. We’re asked to pledge allegiance to the flag and to the Constitution.”
Biden’s top priority, she says, should be ending the partisan hostility Trump loves to stoke: “Unifying the country is hugely important. One of the reasons I endorsed him is he is seen as someone who has been willing to reach his hand across the aisle and work in a bipartisan fashion. The only way you solve problems in business or in politics is by working with other people, some of of whom you may not agree with all the time.”
Also important: More stimulus spending, to help end the coronavirus recession. Addressing income inequality. Supporting small businesses under intense pressure amid coronavirus.
Economists question whether Biden’s tax hikes would be appropriate with the economy in a recession, or just barely out of one. Biden, in response, has signaled he wouldn’t pursue that part of his agenda until the second or maybe even third year of his presidency, when the economy is on more stable footing. Trump, for his part, has proposed more tax cuts, such as reducing or ending the payroll taxes business and workers both pay. But those taxes fund Social Security and Medicare and it’s unlikely Congress would cut funding for two cherished programs for seniors.
Investors seem comfortable with a Biden win, even if it brings tax hikes down the road. Biden would be more likely than Trump to pass a huge stimulus bill early in 2021, especially if his fellow Democrats retake the Senate, giving them full control of Congress. Gary Cohn, Trump’s chief economic advisor in 2017 and 2018, said at the All Markets Summit, that he too would be comfortable with Biden’s higher tax rate on businesses. “To me, 28% is probably a good number to land on,” he said.
One of Trump’s reelection challenges is a revolt from prior allies and many fellow Republicans, including groups such as the Lincoln Project and Republican Voters Against Trump. When asked if she still considers herself a Republican, Fiorina said, “The honest answer is, I don’t know, because I do not see myself in the current Republican party.” Biden is the likely beneficiary.
Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. Confidential tip line: firstname.lastname@example.org. Encrypted communication available. Click here to get Rick’s stories by email.