Biden plans biggest tax hike since 1993

The American President, Joe Biden predicts first major federal tax increase since 1993 to help fund the long-term economic program designed as a follow-up to its pandemic relief bill, according to people familiar with the matter.

Unlike the US $ 1.9 trillion stimulus bill, the next move, which is expected to be even bigger, will not rely solely on public debt as a source of funding. While it is increasingly clear that tax increases will be a component – Treasury Secretary Janet Yellen said at least part of the next bill will need to be paid and mentioned higher rates – the senior advisers are preparing a package of measures that could include an increase. both the corporate tax rate and the individual rate for high income individuals.

Since each credit and tax exemption has its own lobby group to support it, changing rates carries great political risk. This helps explain why the tax increases in Bill Clinton’s 1993 reform stand out among the modest changes made since then.

For the Biden administration, the planned changes present an opportunity not only to fund key initiatives such as infrastructure, climate and increased aid to the poorest Americans, but also to tackle what Democrats claim to be. inequalities in the tax system itself. The plan will test Biden’s ability to court the ability of Republicans and Democrats to stay together.

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“His general view has always been that Americans believe fiscal policy should be fair, and he has looked at all of his policy options from that angle,” said Sarah Bianchi, director of US public policy at Evercore. ISI and former economic advisor to Biden. “This is why the emphasis is on the unequal treatment of work and wealth.”

While the White House has rejected a wealth tax, as progressive Democratic Senator Elizabeth Warren proposes, current administration thinking is targeting the wealthy.

The White House is expected to come up with a series of tax increases, mainly reflecting Biden’s campaign proposals in 2020, according to four people familiar with the discussions.

The tax increases envisioned in any broader infrastructure and jobs package will likely include the repeal of parts of President Donald Trump’s 2017 tax law that benefit businesses and the wealthy, as well as other changes to for the tax code to be more progressive, people familiar with the plan said.

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Here are some of the proposals currently planned or under consideration, according to people, who asked not to be tagged because discussions are private:

• Increase the corporate tax rate from 21% to 28%.
• Reduce tax benefits for so-called transfer companies, such as limited liability companies or partnerships
• Raise the tax rate for people earning over $ 400,000
• Widen the scope of the inheritance tax
• A higher capital gains tax rate for people who earn a minimum of $ 1 million per year. (Biden, in his campaign, proposed to apply higher income tax rates)

White House CEO Heather Boushey stressed that Biden has no plans to raise taxes for people who earn less than $ 400,000 a year. But for “the people at the top who have been able to benefit from this economy and who have not been so affected, there is a lot of room to think about what kinds of income we can generate,” he said in Monday. an interview with Bloomberg. TV.

An independent analysis of Biden’s campaign budget plan by the Center for Fiscal Policy estimated it would raise $ 2.1 trillion over a decade, although the administration’s plan is likely less.. Bianchi wrote earlier this month that Congressional Democrats could accept $ 500 billion.

The overall program is yet to be released and analysts are aiming for between $ 2 trillion and $ 4 trillion. A date for an announcement has not yet been set, although the White House has said the plan will follow the signing of the COVID-19 relief bill.