Biden’s budget ideas are unlikely to receive approval in their current form from either the House or the Senate.
As part of his strategy to cut the debt, President Biden is reportedly planning a series of large tax increases on billionaires, investors, and everyone making over $400,000.
The budget plan that will be unveiled on Thursday proposes almost tripling the current capital gains tax rate from 20% to 39.6%. Billionaires would be subject to a minimum tax rate of 25%.
The proposal, as described in a Bloomberg report, would raise the top tax rate for Those making $400,000 from the current 37% to over 40%, effectively undoing some of President Trump’s most famous tax cuts. Those with annual salaries below $400,000, the article states, would see no change in their tax rate.
The long-term investment tax rate would nearly treble from 20% to 39.6% for those with incomes over $1 million per year. The corporation tax rate proposed by Biden would rise from 21% to 28%.
A statement from the White House released on Wednesday said that the proposal is part of President Biden’s larger plan to cut deficits by roughly $3 trillion over the next decade.
President Biden said in his State of the Union address last month that he would cut the deficit by $2 trillion, but this goal is much more ambitious. This is in stark contrast to the position taken by House Republicans, who have called for but not presented a balanced budget plan.
Before Biden’s Thursday speech in Philadelphia, White House press secretary Karine Jean-Pierre stated, “This is something we think is crucial.” An official described it this way: “This shows the American people that we mean business.”
As part of the budget process, the president has already expressed his plan to increase the Medicare payroll tax on those making over $400,000 per year, as well as to tax the assets of billionaires and other highly rich people.
A senior administration official has stated that the plan will also seek to close the “carried interest” tax loophole, which currently allows high-income taxpayers like hedge fund managers to pay taxes at a reduced rate. It would also make it harder for billionaires to use 401(k)s and other tax-deferred savings accounts as a means of evading taxes. It is estimated that eliminating the tax exemption for bitcoin transactions will save $24 billion during the same time frame.
The House and Senate are not likely to approve of Biden’s spending priorities plan in its current form. Senate Minority Leader Mitch McConnell, a Republican from Kentucky, said on Tuesday that the plan “will not see the light of day.” Given the proximity of the 2024 election, this may indicate its primary use as a political statement.