Hard on the heels of the recently passed $1.9 Trillion Covid-19 relief bill, sources have told Bloomberg News that President Joe Biden is preparing the first major federal tax increase since 1993. The revenue would be used to fund an economic program that would include, among other items, infrastructure and a jobs package.
The tax hikes included in any broader infrastructure and jobs package are likely to include repealing portions of President Donald Trump’s 2017 tax law that benefit corporations and wealthy individuals, as well as making other changes to make the tax code more progressive, said the people familiar with the plan.
The following are among proposals currently planned or under consideration, according to the people, who asked not to be named as the discussions are private:
- Raising the corporate tax rate to 28% from 21%
- Paring back tax preferences for so-called pass-through businesses, such as limited-liability companies or partnerships
- Raising the income tax rate on individuals earning more than $400,000
- Expanding the estate tax’s reach
- A higher capital-gains tax rate for individuals earning at least $1 million annually. (Biden on the campaign trail proposed applying income-tax rates, which would be higher)
It seems to me that Biden himself took advantage of these “so-called pass-through businesses” after leaving office in 2016. During his campaign, CNBC reported that the Bidens had set up a pair of “S” corporations to reduce taxes on over $10 million of income in 2017 and over $3.2 million in 2018. These earnings were generated by book deals and speaking fees.
According to Bloomberg, the (Urban-Brookings) Tax Policy Center conducted an independent analysis of this tax plan during Biden’s campaign and reported “it would raise taxes by $2.
41 98 percent of Gross Domestic Product (GDP).”
Former Biden economic aide Sarah Bianchi told Bloomberg, “His whole outlook has always been that Americans believe tax policy needs to be fair, and he has viewed all of his policy options through that lens. That is why the focus is on addressing the unequal treatment between work and wealth.”
It’s amazing how supportive people can be for a tax increase when it doesn’t affect them.
I can’t imagine any Republican lawmakers will endorse this legislation, although Bloomberg notes there might be bipartisan support for specific taxes “such shifting from a gasoline tax to a vehicle-miles-traveled fee.”
Nor do I foresee too many Democrats opposing it. One possibility is Sen. Joe Manchin, a moderate Democrat from the bright red state of West Virginia. Manchin has been known to vote with the Republicans as he did in the confirmation vote for now-Supreme Court Associate Justice Brett Kavanaugh.
The Hill reports that when previously asked about repealing the Trump tax cuts, Manchin said that would be “ridiculous.” However, he walked back that comment later on and said, “Everything’s open for discussion.”
Finally, Bloomberg ‘s sources told them that “any tax increases that are passed would likely take effect beginning in 2022 due to the current high level of unemployment.”
Still, raising taxes on those most likely to hire workers just as the country is pulling out of a downturn is not a smart strategy and will lead to a slower, longer recovery.