US President Joe Biden’s upcoming federal budget plan is laden with spending proposals and higher taxes on the wealthy that forms a blueprint for his expected 2024 re-election bid.
Biden’s proposal, which he will lay out in the swing state of Pennsylvania on Thursday afternoon, will face stiff opposition in Congress this year after Republicans won control of the House of Representatives in November’s midterm elections and large parts of it are unlikely ever to be enacted.
The plan, however, was a political statement that directly defied Republican House Speaker Kevin McCarthy’s threat to block an increase in the $31.4 trillion limit on federal borrowing unless Biden agreed to rein in federal spending.
The Democratic president will highlight plans to cut, though not eliminate, the nation’s deficit by nearly $3 trillion across 10 years, a pledge he made in his State of the Union speech. He will aim to do that by raising taxes on those earning more than $400,000 a year and ending some corporate tax breaks enacted in 2017 under then-President Donald Trump.
“The president’s budget details a roadmap to build on that progress and finish the job,” said Shalanda Young, director of the White House Office of Management and Budget.
Biden proposed funding higher outlays and closing the deficit by imposing a 25 percent minimum tax on billionaires and doubling the capital gains tax from 20 percent, the White House said.
Here are some of the highlights of the upcoming budget:
- Biden will promise to cut almost $3 trillion over 10 years, with tax hikes on companies and high earners.
- The budget calls for raising the Medicare tax on income above $400,000 from 3.8 percent to 5 percent, and expand the federal government’s ability to negotiate drug prices to keep the healthcare program solvent.
- It proposes quadrupling the 1 percent tax on stock buybacks that took effect in January, to encourage companies to invest in their growth instead of boosting shareholders.
- Biden will call for a 25 percent minimum tax on households worth more than $100m. The White House refers to it as the “billionaire minimum income tax.”
- The budget includes a proposal to raise the corporate tax rate to 28 percent, higher than the current level but still below the 35 percent tax rate that prevailed before 2017 tax cuts enacted by his predecessor Donald Trump.
- The budget reintroduces a provision to expand the child tax credit to lower-income families. Twenty-two states have already begun work on similar provisions. It also aims to reduce the cost of childcare and ensure free preschool for all of the country’s four-year-olds. White House officials say lowering the cost of childcare will boost the economy and allow more women to return to work.
- The budget also proposes cutting tens of billions of dollars in tax benefits currently enjoyed by oil and gas companies, real estate investors, fund managers, wealthy retirement savers and cryptocurrency traders.
‘Little-to-no shot’
Former Vice President Mike Pence, a Republican who is considering running in the 2024 presidential election, called the budget plans “a mishmash of shell games, budget gimmicks, and massive tax hikes that will harm economic growth while merely delaying Medicare’s insolvency by a few more years”.
He said Biden could eliminate hundreds of billions of dollars from the deficit by repealing some of his policies, including a student loan forgiveness plan.
“The Budget reflects the President’s ironclad belief that we need a tax system that rewards work, not wealth—and that ensures the wealthiest Americans and biggest corporations don’t pay lower tax rates than teachers or firefighters,” the White House said in a statement.
John Gimigliano, a senior tax executive at the accounting firm KPMG, said that, while Biden’s proposals had “little-to-no shot” at becoming law, they served an important political purpose.
“While the tax proposals that will be put forth by the administration later today are unlikely to get much traction in a divided Congress, it is the job of the president to reinforce the current administration’s view of the tax system for the American people and to keep these ideas alive in their minds as we head into the 2024 elections,” he said in a statement.
Republicans have said Biden’s spending during his first two years in office drove inflation to nearly 40-year highs last year. The Federal Reserve estimated that COVID-related federal spending under Trump and Biden in 2020 and 2021 added 2.5 percentage points to US inflation.
Republicans are already readying $150bn in cuts to non-defence discretionary programmes, including about $25bn from the Department of Education, cuts in foreign aid and programmes aimed at preventing sexually transmitted diseases. They have said that would save $1.5 trillion over a decade.
Is there common ground? “Very little, very little,” Republican Representative Ben Cline told Reuters. “He doesn’t want to cut any spending, he just wants to raise taxes.”
