Biden to propose tax hike on billionaires’ investment income in 2024 budget
President Joe Biden’s Fiscal Year 2024 Budget Proposal would call for a 25 per cent minimum tax on the wealthiest Americans by closing a notorious tax loophole often used to avoid paying tax on their investments.
The tax proposal would eliminate the loophole by which business owners can use “passthrough businesses” to receive profits from their own ventures while avoiding the personal income taxes that would be incurred if they were paid the same amount directly.
Mr Biden’s plan, which he is expected to unveil in Philadelphia on Thursday, would also reverse Trump-era tax cuts for Americans making more than $400,000 per year to 39.6 per cent, rather than the 37 per cent paid following enactment of former president Donald Trump’s Tax Cuts and Jobs Act.
Speaking during a briefing for reporters ahead of Mr Biden’s travel, White House Budget Director Shalanda Young said the plan “comes at a critical moment for our country and the time when the President's economic strategy is working”.
“The economy has added 12 million jobs, the unemployment rate has fallen to the lowest level in more than 50 years, and we just had the two strongest years for new small business applications on record. The president's budget details a roadmap to build on that progress and finish the job,” she said.
Ms Young said Mr Biden’s budget proposal is “built on four key values: Lowering costs for families, protecting and strengthening Social Security and Medicare, investing in America and reducing the deficit by ensuring that the wealthiest in this country and big corporations pay begin to pay their fair share, and cutting wasteful spending on Big Pharma, big oil and other special interest”.
“It does all that while ensuring that no one earning less than $400,000 per year will pay a penny more new taxes,” she added.
By law, presidents are required to submit a budget to Congress each spring, and Congress must pass a budget before the new fiscal year begins on 1 October. Yet at the same time, Congress rarely takes the president’s budget as more than a mere suggestion of priorities and often ignores it entirely while crafting their own appropriations legislation.
Mr Biden’s budget rollout also comes just months to go until the US government would be forced to default on its sovereign debt.
On Wednesday, White House Press Secretary Karine Jean-Pierre said the president’s budget proposal would cut at least $3 trillion from the federal deficit — a full trillion more than what he promised to slash in last month’s State of the Union address to Congress.
“The president's budget, which we will release tomorrow, will cut the deficit by nearly $3 trillion over the next 10 years. That's nearly a $6 trillion difference between the president's budget and congressional Republicans’ agenda which would add $3 trillion to the debt,” she said.
At her briefing the day before the budget release, Ms Jean-Pierre pointed to the massive corporate and individual tax cuts enacted under Mr Biden’s predecessor as an example of the GOP’s irresponsible record on budgeting, describing the Trump-era tax cuts as “a reckless and unpaid tax handout for the wealthy and large corporations which added nearly $2 trillion to the deficit”.
By contrast, she said Mr Biden’s approach to budgeting has been “responsible”.
“Thanks to his unprecedented vaccination programme and economic recovery, the deficit fell by $1.2 trillion in the first two years of the Biden-Harris administration. And the President's Inflation Reduction Act will reduce the deficit by more than $200 billion over the next decade. Building on that record of fiscal responsibility, the president budgets cuts the deficit again by nearly $3 trillion over the next decade,” she said.
“The budget achieves this while lowering costs for families investing in America and protecting programs Americans have paid into because it proposes tax reforms to ensure the wealthy and large corporations pay their fair share while cutting wasteful spending on special interest interests like big oil and Big Pharma. That's a stark contrast to congressional GOP proposals, which again, add $3 trillion to the deficit over 10 years with handouts to the rich, big corporations and special interest groups”.
Ms Young, who runs the White House Office of Management and Budget, said on Thursday that Mr Biden’s proposal “builds on the inflation reduction that which some congressional Republicans are trying to repeal and continues lowering costs for families”.
“We've been encouraged about the recent slowdown in inflation, that we know there's more work to do. Families need a little breathing room. And that's why the budget includes proposals to bring down the cost of everyday necessities and lowers healthcare costs, including by making permanent standard ACA premium tax credits as Ira extended, it lowers prescription drug costs by capping the price of insulin at $35 or monthly prescription and strengthens Medicare's newly established negotiation power and lowers housing costs by increasing affordable housing supply and expanding access to affordable rent through the Housing Choice Voucher Program to well over 200,000 more households,” she said.
“At a time when congressional Republicans have talked about cutting Medicare and Social Security. This budget protects and strengthens these programs that seniors have paid into their entire lives. It strengthens Medicare by extending the solvency of the Medicare trust fund by at least 25 years without cutting any benefits or raising costs for beneficiaries. And it rejects benefit cuts to Social Security, and instead ensures that seniors and people with disabilities quickly and efficiently get the benefits they are and the budget also makes clear that the President is committed to working with Congress to ensure both of these programs remain strong now and in the future”.
Ms Young added that cuts to benefits programs such as Social Security and Medicare are “not on the table”.
Republicans, who now control the House of Representatives, have pointed to the record federal deficits and spending levels enacted over the last several years as reason to hold off on raising America’s statutory debt limit.
But Ms Young noted that they haven’t released a counter-proposal even though Congress is in charge of budgeting.
“Congressional Republicans keep saying they want to reduce the deficit. But they haven't put out a comprehensive plan showing what they'll cut. Will it be Medicare, Social Security, the Affordable Care Act, veterans benefit, we don't know until they put out a plan. So we're looking forward to seeing their budget so the American people can compare it to what we're putting out today, this President's vision,” she said.
Many in the GOP, including former president Donald Trump, have demanded that the GOP use the possibility of a default on America’s soveriegn debt as leverage to extract concessions from the Democratic-controlled White House and Senate.
Prominent GOP figures frequently claim that raising the statutory debt limit to enable the US to continue meeting financial obligations — a practice that was once routine under presidents of both parties and met no objections when it was done under Mr Biden’s predecessor — is akin to authorising new spending.
That claim, however, is not how the debt limit works. The statutory debt limit has absolutely nothing to do with federal spending levels because federal spending levels are set each year in a series of 12 appropriations bills that must be passed by Congress and signed into law by the president.
Moreover, raising the debt limit does not increase or decrease the amount of money that is spent on programs that have already been authorised by Congress and have had funds allocated to them in appropriations legislation.
But experts say a failure to raise the debt limit would force the government to default on its debt and precipitate a worldwide financial crisis. The last time the US flirted with that disastrous outcome was 2011, when Republicans controlled the House and Democrats controlled the Senate and the White House. Mr Biden, then the vice president under Barack Obama, led the negotiations with congressional leaders that headed off a default, but not before the US had its credit rating decreased for the first time in history.
Yet despite Republicans’ insistence that spending cuts will be a necessary condition to any deal to lift the debt ceiling, they have not introduced any budgeting or spending plan of their own.
Ms Jean-Pierre said Mr Biden’s remarks on Thursday would allow him to “lay out in a transparent way to the American people how he sees us moving forward ... as it relates to the budget”.
She also called out the GOP for having no plan to counter Mr Biden’s proposed budget.
“We hear Republicans in Congress talking about how they're going to release a budget and we are calling on them to show us what's in your budget — is it going to be transparent? Is it going to be fiscally responsible?” she said, adding that the GOP has talked about cutting “incredibly important” programmes such as Social Security, Medicaid, Medicare, and Affordable Care Act subsidies that help Americans purchase health insurance.
“That's what they're saying they want to move forward with, and the President is saying: ‘You know what? I'm going to continue fighting for the American people. I'm going to continue fighting for taxpayers who have paid into this these programs since they were starting their first jobs, some of them as teenagers,’” she said. “So we're going to continue to call that out”.