Biden plans to beef up IRS to claim up to $700bn in tax from richest Americans
Joe Biden plans to give tax collectors an extra $80bn to seek as much as $700bn in new revenue from high earners and large corporations, as part of the “American Families Plan” set to be unveiled this week.
Separately, the White House announced overnight that Biden will issue an executive order requiring federal contractors to pay a $15 minimum wage to workers on federal contracts.
Enhanced tax enforcement by the Internal Revenue Service (IRS), coupled with new disclosure rules, could raise $700bn over the next decade from wealthy people and privately-owned businesses, according to unidentified administration officials speaking to the New York Times.
The additional funding represents an increase of two-thirds over the agency’s entire funding levels for the past decade.
In a statement, the administration said the new federal wage floor “will promote economy and efficiency in federal contracting, providing value for taxpayers by enhancing worker productivity and generating higher-quality work by boosting workers’ health, morale, and effort”.
“The executive order ensures that hundreds of thousands of workers no longer have to work full time and still live in poverty. It will improve the economic security of families and make progress toward reversing decades of income inequality,” it said.
The measures come ahead of a major policy speech before a joint session of congress on Wednesday in which Biden is expected to frame raising taxes on wealthy Americans employing sophisticated schemes to lower tax exposure and closing corporate loopholes as a way of leveling the tax burden between middle and lower earning Americans and the wealthy.
As part of the new tax structure, the administration plans to raise the top income tax rate to 39.6% from 37% and raising capital gains tax rates on those who earn more than $1m a year. Tax rates will also be raised on income for people earning more than $1m per year through stock dividends.
Earlier this month, IRS commissioner Charles Rettig told a Senate committee that tax cheats cost the government as much as $1tn a year and the agency lacked the resources to enforce the tax code. Biden, it is widely reported, plans to use additional money raised by a crackdown to help pay for his “American Families Plan.”
But higher taxes face a pushback from Silicon Valley and Wall Street. Administration sources told the Financial Times that capital gains tax rise will hit only the richest 0.3% – a “sliver” of the US population.
Conversely, the White House has said that raising the minimum wage for hundreds of thousands of workers on federal contracts is “critical” to the functioning of the federal government “for cleaning professionals and maintenance workers who ensure federal employees have safe and clean places to work, to nursing assistants who care for the nation’s veterans, to cafeteria and other food service workers who
ensure military members have healthy and nutritious food to eat, to laborers who build and repair federal infrastructure”.