The Biden administration is reportedly planning what will be the largest hike in federal taxes in nearly three decades, a move that comes on the heels of a behemoth COVID-19 spending package .
On the campaign trail, President Biden laid plans to increase taxes on high-earning individuals and expand the corporate tax rate, plans that were opposed by then-President Donald Trump.
Now that Biden and congressional Democrats passed the $1.9 trillion spending package aimed at providing assistance to those suffering the economic effects of the pandemic, his administration is shifting its focus to revenue-building measures in conjunction with an enormous infrastructure package. It is expected to be even bigger than this month’s spending package and won’t just rely on funding through government debt.
The possible tax increases would be the boldest since President Bill Clinton’s 1993 overhaul of the tax code and would include a number of measures, many of which have been discussed for months before Biden was sworn into office. Bloomberg, citing four people involved in the White House’s private tax policy discussions, reported on Monday that the plan is to make federal taxes more progressive and to nix portions of Trump’s signature 2017 tax act.
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Among the considerations are increasing the income tax rate on those making more than $400,000 per year, boosting the corporate tax rate by 7% (from 21% to 28%), raising the capital-gains tax rate for those making at least $1 million per year, expanding the reach of the estate tax, and changing the tax preference structure of “pass-through businesses” such as partnerships and limited-liability companies.
The Tax Policy Center released an updated analysis of Biden’s tax plan in November after the election. It found that the plan would boost federal revenues by some $2.1 trillion over the next decade. Under Biden's plan, households with the highest incomes would see "substantial" tax increases while tax burdens would decrease for low- and middle-income households, according to the analysis.
Sen. Joe Manchin, a centrist Democrat and a key swing vote in the evenly split Senate, predicted that the overall price of Biden’s long-term economic plan will be more costly than his spending package for COVID-19 relief, as much as $4 trillion.
Implementation of Biden’s restructuring of federal taxes and infrastructure spending will inevitably involve partisan wrangling. Republicans complained that they lacked a voice in crafting the COVID-19 spending package as Democrats jammed through the $1.9 trillion legislation without a GOP supporter in the House or the Senate.
Manchin will play a key role in Biden’s economic and infrastructure plan, which also targets the issue of climate change. The West Virginia lawmaker vowed last week that Republicans will have a say when debating the spending package and tax hikes and insisted that he would block the package if the GOP lacks a seat at the table.
“I'm not going to do it through reconciliation,” Manchin told Axios, referring to a vote that only requires a simple majority. “I am not going to get on a bill that cuts them out completely before we start trying.”
Manchin, citing his concerns about debt and the effects it may have on the future, said he is fine with the infrastructure bill being expensive just so long as it’s paid for through tax revenue. The senator said he will begin the debate by insisting it be 100% paid for by measures such as “at least” increasing the corporate tax rate to 25% and removing much of the Trump tax cuts that benefited those who are wealthy.
Republicans are already bristling at some of the possible tax increases. Senate Minority Leader Mitch McConnell has predicted that Democrats will want to boost the corporate tax rate beyond Biden’s 28% and GOP Rep. Kevin Brady of Texas, the ranking member on the House Ways and Means Committee, said that taxing investment of capital gains at marginal income rates would be a “terrible economic mistake.”
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The Washington Examiner contacted the White House about the Biden administration’s tax discussions but did not immediately receive a response.
