President Joe Biden unveiled the third budget of his presidency, vowing to increase spending, raise taxes, and reduce the federal deficit.
Over the next decade, the $6.8 trillion budget (pdf) proposes approximately $5.5 trillion in tax increases on high-income earners and corporations.
The White House includes a 25 percent minimum tax on the wealthiest Americans with more than $100 million. This consists of all of their income, including appreciated assets, “because no billionaire should ever pay a lower tax rate than a schoolteacher or a firefighter.
President Biden’s budget suggests increasing the corporate tax rate from 21 percent to 28 percent, ensuring that “large corporations pay their fair share.” The administration estimates this would generate $1.326 trillion in revenue.
“Corporations received an enormous tax break in 2017, cutting effective U.S. tax rates for U.S. corporations to a low of less than 10 percent,” the budget report stated. “While their profits have soared, their investment in the economy did not. Their shareholders and top executives reaped the benefits, without the promised trickle down to workers, consumers, or communities.”
On the issue of former president Donald Trump’s Tax Cuts and Jobs Act, Biden plans to repeal tax reductions for the wealthy and reform the capital gains tax by “taxing capital gains at the same rate as wage income for those with more than $1 million income” and closing the carried interest component.
The 2024 budget also includes Biden’s previous plan to quadruple the stock buyback tax from 1 percent to 4 percent while closing tax loopholes that “overwhelmingly benefit the rich and the largest, most profitable corporations.” This includes ending the “like-kind exchange loophole” that helps real estate investors defer tax indefinitely.
Administration officials believe that increasing taxes on the wealthy can help pay for the president’s spending priorities, such as additional funding for child care and early childhood education, expanding free community college, and bolstering the $35 cap on the price of insulin. They also project that this would slash the federal deficit by nearly $3 trillion over 10 years. However, the current budget presentation would raise next year’s deficit to $1.8 trillion.
Shalanda Young, director of the Office of Management and Budget, told reporters that the administration can trim deficit spending “by asking the wealthy and big corporations to begin to pay their fair share and by cutting wasteful spending on big pharma, big oil, and other special interests.”
“Families need a little breathing room, and that’s why the budget includes proposals to bring down the cost of everyday necessities and lowers healthcare costs,” she said.
Republican Leadership: ‘Completely Unserious’
Republicans called the president’s budget to Congress “completely unserious.”
“He proposes trillions in new taxes that you and your family will pay directly or through higher costs,” House Speaker Kevin McCarthy (R-Calif.) wrote in a tweet. “Mr. President: Washington has a spending problem, NOT a revenue problem.”
Sen. Rick Scott (R-Fla.) warned that one of the nation’s largest budgets in history would “bankrupt Floridians.”
“The budget [the president] proposed today shows the American people he doesn’t value them,” he said in a statement. “If he did, he would get serious about rolling back burdensome regulations and focus on growing the economy so American business can create more, good paying jobs.”
Private industry is also reacting to Biden’s budget outline.
The National Association of Wholesaler-Distributors (NAW), for example, asserted that the announcement hurts Main Street businesses and working families.
“The proposed tax increases in the president’s budget are a blatant attack on Main Street businesses and the families they support,” said Alex Hendrie, associate vice president for government relations at the National Association of Wholesaler-Distributors (NAW), in a statement. “President Biden’s proposed tax increases could not even pass when Democrats controlled both houses of Congress and are totally detached from reality.”
The wholesale distribution firm listed several examples that would negatively affect Main Street firms. This consists of the 1.2 percent hike to the net investment income tax (NIIT), the 2.6 percent increase to the top individual tax rate that includes main street firms organized as S-corporations and partnerships, and “additional limitations on the ability of passthrough businesses to deduct business losses.”
However, the Institute on Taxation and Economic Policy (ITEP) called it a “bold vision for tax justice” that would significant revenue and ensure “tax fairness.”
“The revenue raisers are laser focused on taxing very wealthy individuals and corporations, and the budget would reduce the deficit while easing costs for American families, particularly for middle and low-income parents,” said ITEP executive director Amy Hanauer.
Despite being touted as a deficit-fighting plan, the White House proposal forecasts more than $1.3 trillion in annual deficits every year for the next decade.
The federal debt would grow to more than $43 trillion, raising the debt-to-GDP ratio to 102.4 percent. Interest payments would also top $1.3 trillion in the next decade, representing 5.1 percent of GDP.
“[I]n the longer term, debt would grow by $19 trillion through 2033 under the president’s budget and reach a record share of the economy in only four years,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget (CRFB), in a statement. “The president should have a plan to truly bring the debt under control before suggesting trillions of dollars in new spending and tax breaks. $3 trillion of deficit reduction is welcomed, but since taking office, the president has approved over $5 trillion of new debt from legislation and executive actions. We desperately need to change course.”
Rep. Elise Stefanik (R-N.Y.) stated that “our worst fears were confirmed” with the Biden budget.
“[A]fter passing trillions of dollars in new deficit spending that we cannot afford, over the next 30 years, the national debt will be nearly twice the size of the entire economy,” she said. “In the next 10 years, the federal government will spend over $10 trillion on interest alone.”
It is still unclear when the Republicans will release their official budget alternative.