Does Joe Biden Know Why Delaware Is Home to So Many Corporations?

President Joe Biden knows that his home state of Delaware is also home to more corporations than just about any other place on the planet—but he doesn’t seem to know why.

Let’s take, for instance, the speech Biden gave last month in Baltimore. Biden made the remarks in Baltimore, Maryland, just days after the signing of the bipartisan infrastructure bill worth $1.2 trillion. While it seemed like a win-win situation, President Obama used the occasion to support the second half of his domestic agenda: Build Back Better. A crucial part of that massive spending package—which includes spending for child care, subsidies for electric vehicles, and a huge tax break for wealthy residents of high tax states—is a set of tax increases aimed at high-earning individuals and, importantly, corporations.

As Biden put it that day in Baltimore, Build Back Better was intended to “build an economy from the bottom up and the middle out…where everybody is better off.”

“You’re tired of all this trickle down economy stuff,” the president stated. “I come from Delaware—just across the line up here—and, you know, we have more corporations in Delaware than every other state in the nation combined. Because I am a big-business person, you can trust me.

Only one Very smallBiden is missing a bit of context in his argument. Delaware, home to over half the Fortune 500 businesses, has not become America’s most popular destination for corporate headquarters. This could be because it raises taxes on its businesses. It is known for having favorable tax laws. There are no sales taxes, no corporate income or corporate tax on income earned in Delaware and no tax on corporate income on investments. There are other benefits to being based in Delaware, such as a special legal system that gives businesses some advantages.

Biden wants to steer the country in the other direction. Earlier versions of Build Back Better called for hiking the corporate tax rate to 28 percent (currently at 21 percent). This would have meant that American-based companies were subject to the most high taxes around the globe. The most recent version of the proposal, however, ditched that tax hike in favor of a new 15 percent minimum tax on corporations that earn over $1 billion in annual profits—a tax that would have to be paid even if the corporation owed no federal income tax—and a new surtax on corporate stock buybacks. These two revenue-generating elements are estimated to take out about $500 billion annually.

This was not just a rhetorical slip by the president during his Baltimore speech. The recurring phrase has been an integral part of Biden’s stump speech to the Build back Better plan.

Biden said this in an October interview to Anderson Cooper of CNN. “You are living in a situation where corporations America don’t pay their fair share. The corporate state is Delaware. Delaware has more corporations than any other state combined.

And here he is during a speech at a tech school in Minnesota in late November: “More corporations are incorporated in Delaware than every other nation and every other—excuse me—state in the nation. Guess what? Fifty-five percent of the Fortune 500 companies—the largest ones—paid zero in income taxes last year after making $40 billion in profits.”

On a recent visit to the Michigan General Motors facility, she said: “Well I’ll tell ya what, real simple: My family is the corporate capital in the world.” There are more corporations [are]Delaware was home to the largest number of incorporations in all 50 states. You know what else? And guess what? They don’t pay enough.”

It’s easy to eye-roll away Biden’s deliberate misunderstanding of Delaware’s corporate tax situation as just so much meaningless political bullshit—the equivalent of me claiming that, since I’m from Pennsylvania, I innately understand the economics of running a cheesesteak joint, while also proposing a new tax on Whiz and onions.

Biden still uses the Delaware example often, and it is instructive in at least one respect. It is a microcosm of the entire monthslong effort by the White House and its allies to push Build Back Better through Congress—and, more broadly, perhaps even a useful metaphor for Biden’s first year in office as a whole.

Economists warned that the passage of a huge stimulus bill could cause inflation. But they pushed the bill through anyway. Now, inflation is real.

This is the exact same administration that faced opposition from Senate Democrats and borrowed more money. They rewrote the Build Back Better plan, heavily relying on budget gimmicks in order to conceal the real cost.

The same administration continues to ignore what economists call the long-term implications of passing such a massive expansion of the federal welfare system: slower growth over the long term, lower average wealth and huge amounts of debt.

It seems that economic reality can be easily ignored by the Biden administration when it is in conflict with a political agenda. Unfortunately, you can’t go far with misleading or inaccurate arguments regarding major policy shifts. Maybe it is no surprise that Build back Better appears to have stalled, at the very least for now.

If Biden really wanted to ask the question about Delaware’s home for so many companies, there might be some other valuable lessons. Being business-friendly has worked out pretty well for Biden’s home state—one of the wealthiest in the country in terms of GDP per capita. The gap between Delaware’s wealthiest and most vulnerable residents is much smaller than that of the national average.

Biden could say he is sick of this trickle-down stuff, but the evidence from his home state shows that lower taxes can be a major factor in achieving prosperity.