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Jeff Bezos and Joe Biden engaged in a war of words: Can corporate taxes control inflation?

This weekend Jeff Bezos became the latest billionaire to launch a political fight on Twitter by denouncing President Joe Biden’s tweet about corporate taxes as “misinformation” and “misdirection”.

The White House responded immediately on Monday that Bezos “opposes the economic agenda for the middle class.” Bezos argues that the Biden administration would have worsened inflation if its so-called “Build Back Better” $ 3.5 trillion (approximately Rs. 2,72,14,250 crore) economic and social spending bill had been enacted into law. .

“They failed, but if they succeed, inflation will be higher than it is today and today inflation is at a 40-year high,” Bezos tweeted.

This controversy represents an unusually high level for Bezos, who generally openly sought to avoid political fights. Bezos is the second-richest man in the world with $ 150 billion (approximately Rs. 11,66,325 crores) behind Elon Musk, who reached $ 268 billion (approximately Rs. 20,50,725 crores). Musk, the founder of Tesla who wants to buy Twitter, often uses the social media platform to attack his critics and choose struggles over freedom of speech.

The controversy erupted when Biden’s account tweeted on Friday: “Do you want to reduce inflation?” Let’s make sure the rich companies pay their fair share. ”

Biden has often accused e-commerce giant Amazon, which founded and ran Bezos for nearly a quarter of a century, of failing to pay a fair share of taxes. In 2017 and 2018, Amazon earned billions in profits but did not pay income tax. Since then, the company has made modest tax payments.

Bezos responded by tweeting, “Raising carp taxes is a good thing to discuss.” “Controlling inflation is crucial to discuss. Combining them is just misleading.

On the real policy question – whether raising corporate income taxes can stave off inflation – many economists are giving Biden a warning edge.

Harvard economist Larry Summers, who served as secretary of the Treasury during the Clinton administration, tweeted, “I think Jeff Bezos made a big mistake in the recent attack.”

“I believe we need to raise taxes and keep growth as progressive as possible to reduce demand to control inflation,” Summers added.

In fact, raising corporate taxes will reduce corporate spending, reduce overall demand and “reduce pressure on prices,” said Michael Strain, an economist at the Conservative American Enterprise Institute.

However, Strain and other economists warn that any rate hike will take several months to have a greater impact and, however, will not reduce inflation much.

“Of all the things I do to control inflation, corporate income is far from on the tax list,” added Carl Tannenbaum, chief economist at Northern Trust, a property management company based in Chicago.

Alan Zerbach, an economist and tax expert at the University of California, Berkeley, points out that Bezos has a point when it comes to the long-term impact of high corporate taxes.

A higher corporate income tax will leave companies with less money to invest in additional capacity, Auerbach said. Over time, this financial burden will increase their production costs.

“In the long run, it’s true that you expect prices to be higher as a result of higher corporate taxes,” Zerbach said.

Neither the White House nor Bezos mentioned an interesting background to their dispute: a year ago, Bezos approved a biden proposal to raise the corporate income tax rate to pay for more infrastructure investment.

“We recognize that this investment needs concessions from all sides – along with the specifics of how it will be paid (we support the increase in the corporate tax rate),” Bezos wrote on the Amazon website in April. 2021.

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