Proposed tax increases could eliminate 1 million jobs in two years, a study showed.

Study: Tax hikes would cost 1 million jobs in first two years

The proposed tax increases in the Biden administration’s infrastructure plan could lead to 1 million fewer jobs in the first two years, according to a study conducted by Rice University economists for the National Association of Manufacturers.

President Joe Biden has proposed funding his $2.3 trillion infrastructure plan largely through an increase in the corporate tax rate to 28 percent and an expanded global minimum tax set at 21 percent.

Economists John Diamond and George Zodrow calculated the effects of increasing the corporate tax rate to 28 percent, increasing the top marginal tax rate, repealing the 20 percent pass-through deduction, eliminating certain expensing provisions and more.

Among their findings:

■ 1 million jobs would be lost in the first two years.

■ By 2023, gross domestic product would be down by $117 billion, by $190 billion in 2026 and by $119 billion in 2031.

■ Ordinary capital, or investments in equipment and structures, would be $80 billion less in 2023 and $83 billion and $66 billion less in 2026 and 2031, respectively.

The study also notes the following:

■ Investments in intangibles are highly mobile and more sensitive to marginal tax rate changes. Such investments would fall 2.7 percent by the second year and would be down a total of 3.8 percent by the fifth year.

■ The average annual reduction in employment would be equivalent to a loss of 600,000 jobs each year over 10 years.

■ Real wages would fall by 0.6 percent in the long run, and total labor compensation, including wages and benefits, would decline by

0.6 percent initially before falling by 0.3 percent after 10 years. In the long run, total compensation would also decline by 0.6 percent.

Business groups such as the U.S. Chamber of Commerce and the Business Roundtable argue that higher taxes would hurt U.S. companies operating worldwide and the wider economy.

The Penn-wharton Budget Model issued a report this week saying the combined spending and taxes would cause government debt to rise by 2031 and then decrease by 2050. But following the plan, GDP would be lower by 0.8 percent in 2050.

West Virginia Sen. Joe Manchin, a key Democratic vote, would prefer a 25 percent corporate tax rate.

Commerce Secretary Gina Raimondo said businesses and lawmakers should come to the bargaining table.

“There is room for compromise,” Raimondo said at a White House briefing. “What we cannot do, and what I am imploring the business community not to do, is to say, ‘We don’t like 28. We’re walking away. We’re not discussing.’ ”