With the government at risk of default, President Joe Biden on Thursday will make his opening bid in a high-stakes debate on federal finances as he proposes a federal budget that would cut deficits by nearly $3 trillion in the next decade.
It is part of a broader attempt by the president to appeal to House Republicans, who have demanded drastic cuts in federal spending in return for lifting the legal limit on government borrowing. But the GOP has no counter offer so far, except for a flat “no” on a budget plan that could form the core of the policy of Biden’s undeclared campaign for reelection in 2024.
“We see it as a statement of value,” White House press secretary Karine Jean-Pierre told reporters on Wednesday. “It’s something that shows the American people that we take it seriously when we think about fiscal responsibility, when we think about how we’re going to grow.”
Biden’s tax package and spending priorities are unlikely to pass the House or Senate as proposed. Senate Minority Leader Mitch McConnell, R-Ky., predicted in advance that the plan “will not see the light of day,” a sign that it could primarily serve as a messaging document heading into the 2024 election.
Biden will unveil his spending plan in the battleground state of Pennsylvania, targeting what he believes is popular ground that will make it difficult for Republicans to criticize without risking backlash. Biden wants it imposing a tax increase on the rich to limit federal borrowing, including a modification of the 2017 tax cuts President Donald Trump made to people making more than $400,000. Additional income helps progress Medicarethe government’s health insurance program for adults over 65 years of age.
To begin rolling out the plan, Biden floated a new tax on incomes above $100 million. target billionaire. He was called for lower prescription drug prices. The tax paid by companies on stock purchases would be quadrupled, and those earning more than $400,000 would pay an additional Medicare tax that would help keep the program solvent beyond the year 2050.
Biden’s budget would seek to close the “carried interest” loophole that allows wealthy hedge fund managers and others to pay their taxes at a lower rate, and prevent billionaires from spending more amount of their assets in tax-advantaged retirement accounts, according to an administration official. The plan also projects to save $24 billion over 10 years by removing the tax subsidy for cryptocurrency transactions.
The official who provided the budget details spoke on condition of anonymity to preview the plan before its official release.
Biden’s budget plan also:
- Expand Medicare’s ability to negotiate prescription drug prices, saving an estimated $160 billion over a decade.
- Auction of radio spectrum rights, which generated $50 billion.
- Take new steps to reduce identity theft and unemployment insurance fraud.
- Batas insurance companies overcharging Medicaid, with an expected savings of $20 billion through government reimbursement.
- End subsidies worth $31 billion for oil and gas companies.
- Scrap the $19 billion tax break for real estate investors.
House Speaker Kevin McCarthy, R-Calif., called for putting the US government on a path toward a balanced budget. But by refusing to raise taxes or cut spending on Social Security and Medicare, GOP lawmakers face some harsh math that makes it difficult to cut deficits without risking a backlash in voter before the presidential election.
McCarthy told The Associated Press that the release of his plan was delayed because Biden’s proposal had just been released.
Senate Majority Leader Chuck Schumer, D-N.Y., expressed skepticism in a Monday speech that McCarthy has any coherent plan that House Republicans can put together.
“Enough dodging, enough excuses,” Schumer said. “Show us your plan. And then show us how it gets 218 votes on your side of the aisle.
Biden’s deficit reduction goal is much higher than the $2 trillion he promised in his State of the Union last month’s address.
This is a dangerous time, with the US economy already in a weak state due to high inflation. If Biden and Congress fail to raise the statutory debt cap of $31.4 trillion this summer, the government could default in payment and push the US economy into a recession.
Rohit Kumar, a former McConnell aide who is now an executive at tax consultancy PwC, said Biden’s plan was important “in terms of putting ideas out there.” He said that if Biden wins a second term, elements of his spending blueprint will be part of the 2025 negotiations on the expiring provisions of the 2017 tax cuts signed into law by President Donald Trump.
Given the scope of the deficit reduction in Biden’s proposal, Kumar said, it is unlikely that the president plans to know which parts of the expiring tax cuts he plans to keep, because the president promised no tax increase on anyone making less than $400,000. But while the White House charged that Republican plans would increase the deficit by $3 trillion, about $2.7 trillion of that total came from revising all of the Trump-era tax cuts that were not equally favored by the wealthy.
Biden’s budget proposal would change some of the 2017 law. This will raise the top marginal tax rate to 39.6% on income above $400,000. For households with $1 million in income, income from capital gains—such as stocks or property sales—will no longer enjoy a discounted tax rate compared to wages.
The president will increase the corporate tax rate to 28% and increase the tax rate on US multinationals’ foreign earnings from 10.5% to 21%.
In February, the nonpartisan Congressional Budget Office it is estimated that the national debt held by the public will grow by more than $20 trillion in the next decade. The debt held by the public – it shows the cumulative effect of annual deficits – will be equal to 118% of the gross domestic product of the US, up from 98% this year. Biden’s budget would reduce the debt, although it would still be at historic levels.
Biden argued, first and foremost, that his budget would be fair to working and middle-class households.
The president argued in a speech on Monday that there are about 680 billionaires in the United States and that most of them pay taxes at a lower rate than the average family.
“No billionaire should pay a lower tax rate than a firefighter — no one,” Biden said at a gathering of the International Association of Fire Fighters.
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