White House News
March 18, 2021
Biden’s Next Move: Raising Taxes
Following the success in having his $1.9 trillion coronavirus stimulus bill passed in Congress, President Biden is turning his attention to raising taxes on wealthy Americans, a top policy agenda which he campaigned on.
The current tax plan the President wants introduced in Congress includes increasing the tax rate on people making more than $400,000 a year, raising the corporate tax rate from 21 percent to 28 percent, expanding the estate tax, raising the capital gains tax rate for individuals making over $1 million, and paring back tax preferences for pass-through businesses including limited liability companies.
According to an analysis from the Tax Policy Center, Biden’s tax plan would raise around $2.1 trillion from affected Americans over the next 10 years, with the revenue being used to offset the staggering $1.9 trillion price tag on the stimulus bill President Biden signed into law last week. But the Tax Foundation, which also analyzed the plan, found that raising the corporate tax rate would cost 159,000 American jobs and that the tax plan would reduce US economic output by 0.8 percent per year as well as cause a 0.7 percent reduction in wages.
It is not yet clear if Biden’s tax plan could make it through Congress as currently formulated. Moderate Democrats—particularly Democrats elected from reliably red states—are hesitant to throw their support behind a tax increase, which could sink a bill hiking taxes as Democrats contend with a razor-thin majority in the Senate. One of those Democrats, Senator Joe Manchin of West Virginia, has wavered on his backing for President Biden’s plans, and his key vote will be especially closely watched as discussions over the plan get underway.
An anonymous Democratic House member told the Hill that the government should not be raising taxes now. “People would accept the corporate tax raised a few points, but beyond that you’re going to have problems, especially in the middle of an economic crisis,” the lawmaker said.
If it does make it through Congress and is signed into law, Biden’s tax plan would be the first significant tax hike in the United States since 1993.
President Biden has also promised to roll back much of former President Trump’s 2017 Tax Cuts and Jobs Act, which Democrats say heavily favored corporations and America’s wealthiest citizens. However, the President and his aides are now only committing to a partial rollback of Trump’s tax cuts, with a focus on only the parts of the law that help corporations and the ultra-wealthy. But other parts of the bill, including provisions that cut taxes for lower- and middle-class Americans, will be kept as is. Treasury Secretary Janet Yellen said that the President will likely look to reverse Trump’s tax cuts for the wealthy later this year to help fund an infrastructure spending package which is being worked on.
Republicans are already mounting an effort to defend President Trump’s tax cuts and turn public opinion against them being undone by President Biden by warning that the changes proposed by the President would create incentive for more companies to move overseas. “Raising the US rate or making the international regime more burdensome would have an adverse effect on US global competitiveness,” said Rohit Kumar, a former deputy chief of staff to Senate Minority Leader Mitch McConnell. “Doing both would be a double whammy that would ultimately harm US workers and anyone who has a pension or 401(k) invested in US companies.”