Biden, taxes and middle class

Like most presidential budgets before it, President Biden’s fiscal 2025 tax and spending blueprint is more of a political statement than an actual legislative proposal. Basically, it’s a reelection pitch straight from the “Middle Class Joe” playbook he ran on in 2020: raise taxes on the rich and businesses and spend much of the proceeds on federal support for child care, health care and housing. These traditional Democratic priorities failed to become law even when Biden’s party narrowly controlled Congress, so there is zero chance of enactment now.

Considered differently, however — as a reminder of how another four years of Biden in the White House would be unlike a second term for likely GOP nominee Donald Trump — the document has somewhat more meaning. That is especially true for what might be the first major policy area to feel the impact of the voters’ decision in November: taxes.

The short version is that Biden’s tax plan would be fairer and more fiscally responsible than Trump’s. The longer version is: Despite this reality, the country needs a reckoning on its unsustainable budgetary path, and Biden’s proposals, though better than the alternative, do not envisage one.

The wide-ranging tax cuts a Republican Congress and Trump pushed through in late 2017 are set to expire at the end of 2025 — except for the corporate tax-rate cut, which doesn’t expire. It’s a looming deadline that will force whoever occupies the White House and Congress next year to prevent a sudden reversion to pre-2018 law. That would lead to mixed results in terms of equity and efficiency. Upper-income households would face a higher marginal rate; yet the irrational deduction for state and local taxes paid would also be restored. And it would impose a large tax increase on the economy as a whole. Better to plan ahead for selective reinstatement of higher taxes, where needed, and preservation of what was beneficial about the Trump bill.