Higher taxes on the rich, lower deficits

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By JOSH BOAK, Associated Press

WASHINGTON (AP) — President Joe Biden announced a proposed budget on Monday that calls for higher taxes for the wealthy, lower federal deficits, more money for police and increased funding for the education, public health and housing.

Appearing at the White House with his budget director Shalanda Young, Biden said the proposal sends a clear message to the public about “what we value.” He emphasized fiscal responsibility, safety and security, and investments to “build a better America.”

The document essentially attempts to tell voters what a diverse and sometimes fractured Democratic Party stands for ahead of the midterm elections that could decide whether Congress remains under party control.

Bottom line: Biden is proposing a total of $5.8 trillion in federal spending for fiscal year 2023, which begins in October, slightly less than what was expected to be spent this year before the spending bill additional ones are enacted this month. The deficit would be $1.15 trillion.

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There would be $795 billion for defense, $915 billion for national programs, and the balance would go to mandatory spending such as Social Security, Medicare, Medicaid, and net interest on the national debt.

The higher taxes outlined Monday would generate $361 billion in revenue over 10 years and apply to the top 0.01% of households. The proposal lists an additional $1.4 trillion in revenue generated over the next decade from further tax increases intended to preserve Biden’s pledge not to raise taxes on people earning less than $400,000. .

The 156-page plan also shows the shards that persist in Biden’s coalition and the possible gaps between the promises of what’s on offer and the realities of what ultimately emerges. Biden has backed many of these ideas before without necessarily getting full congressional buy-in.

The proposal includes a 20% minimum tax on household income worth $100 million or more, similar to an earlier proposal that Democrats in Congress began debating late last year in an effort to pay for Biden’s domestic spending plans. But those spending plans were put on hold after talks with West Virginia Sen. Joe Manchin broke down.

More money would go to supporting law enforcement, but bipartisan police reform efforts have failed. The budget assumes – with a high degree of uncertainty based on forecasts made last November – that inflation at a 40-year high will return to normal next year.

“Budgets are statements of values,” Biden said in a statement, “and the budget I release today sends a clear message that we value fiscal responsibility, safety and security at home and around the world, and the investments necessary to continue our equitable action”. growth and building a better America.

It’s a pitch for the midterm elections in a nation still unbalanced after a few chaotic years caused by the pandemic, an economic recession, a recovery, challenges to American democracy and the war in Ukraine. The Biden budget plans to cut annual deficits by more than $1 trillion over the next decade. Those cuts would come largely through higher taxes and the expiration of relief spending related to the coronavirus outbreak that began in 2020.

But like most presidential budgets, it is a proposal and a set of ideals rather than the law of the land. Congress is responsible for implementing the budget through tax and spending legislation and annual agency funding.

The proposal was immediately criticized by Republican lawmakers. They noted that deficits well over $1 trillion a year would persist, said higher taxes could hurt growth, and objected that additional government spending would fuel inflation.

“What this budget shows is that President Biden values ​​more spending, more debt, more taxes, and more pain for the American people,” said Rep. Jason Smith of Missouri, the top Republican in the country. House budget committee.

On the fiscal front, it’s unclear how Biden would get his policies through Congress. He previously negotiated a proposed corporate tax rate cut of 28%, and his new minimum tax on the ultra-wealthy would include “unrealized capital gains,” which are potential profits that exist on paper because the underlying asset has not yet been sold.

The upshot is that the special tax on people worth more than $100 million is unlikely to become law anytime soon, said John Gimigliano, head of federal legislative and regulatory services at KPMG.

“It’s kind of like a slow-burn proposal, like let’s keep having this conversation for months or maybe years,” Gimigliano said.

While the budget would increase funding for education, public health and provide $48 billion to increase the supply of affordable housing, it does not specify what the broader successor to the stalled ‘Build Back Better’ program would be. of Biden. That proposal from last year included money for child care, early education, clean energy and reduced health care premiums, but was blocked by Manchin, the deciding Democratic vote.

White House Budget Director Shalanda Young told reporters the plan did not include items related to this possible bill because “discussions with Congress are ongoing.” But the budget plan includes a “deficit-neutral reserve fund” to account for the conclusion of a possible agreement.

The Biden administration last year considered a tax hike that looks like the minimum 20% on total income for people worth $100 million or more. But Manchin denied that idea as divisive. What the Biden administration outlined on Monday would raise $361 billion over 10 years and would apply to the top 0.01% of households. The proposal lists an additional $1.4 trillion in revenue generated over the next decade from other tax changes.

Among the tax changes are a corporate tax rate of 28% and a top individual rate of 39.6%, both increases.

The plan is based on a forecast that the economy will return to normal next year after unprecedented pandemic and inflation-related spending. The budget projects inflation of 4.7% this year and 2.3% in 2023, up from 7% in 2021. Yet prices have continued to climb in the first two months of 2022, and the invasion of the Ukraine by Russia has driven up the prices of oil, gasoline and natural gas. in a way that could spread throughout the economy.

Cecilia Rouse, chair of the White House Council of Economic Advisers, said the administration expects “the economy to normalize” as the country weathers the waves of the pandemic, pressures on the chain of supplies are easing and the “extraordinary measures” of support linked to the off-budget coronavirus roll. This normalization would imply inflation returning to its most typical levels, “but there is huge uncertainty,” Rouse said.

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