Budget plan seeks tax on wealthy
Biden aims to cut projected deficits by $1 trillion over decade
WASHINGTON — President Joe Biden intends to propose a minimum tax of 20% on households worth more than $100 million and to cut projected budget deficits by more than $1 trillion over the next decade, according to a fact sheet released Saturday by the White House budget office.
The introduction of the minimum tax on the wealthiest Americans would represent a significant reorienting of the tax code. It would apply to the top 0.01% of households, with half of the expected revenue coming from households worth $1 billion or more. The minimum tax would prevent the wealthiest sliver of America from paying lower rates than middle-class families, while helping to generate revenue to fuel Biden’s domestic ambitions and keep the deficit in check relative to the U.S. economy.
In his proposal, expected to be officially announced Monday, the lower deficits also reflect the economy’s resurgence as the United States emerges from the pandemic. It’s seen as a sign that the government’s balance sheet will improve after a historic burst of spending to combat the coronavirus.
The fading of the pandemic and the recent growth have enabled the deficit to fall from $3.1 trillion in fiscal 2020 to $2.8 trillion last year and a projected $1.4 trillion this year. That deficit spending paid off in the form of the economy expanding at a 5.7% pace last year, the strongest growth since 1984. But inflation at a 40-year high also accompanied those robust gains as high prices have weighed on Biden’s popularity.
One White House official, insisting on anonymity because the budget has yet to be released, said the proposal shows that Democrats can deliver on what Republicans have promised before without much success: faster growth and falling deficits. Yet the Biden budget would pledge to do so through a wealth tax that many Republicans say would hurt the economy by diminishing private investment in companies that create jobs and cause the wealthy to put their fortunes to work abroad.
Republican lawmakers have said that the Biden administration’s spending has led to greater economic pain in the form of higher prices.
The inflation that came with reopening the U.S. economy as the closures from the pandemic began to end has been amplified by supply chain issues, low interest rates and, now, disruptions in the oil and natural gas markets because of Russia’s invasion of Ukraine.
Senate Minority Leader Mitch McConnell, R-Ky., pinned the blame solely on Biden’s coronavirus relief as well as his push to move away from fossil fuels.
“Washington Democrats’ response to these hardships has been as misguided as the war on American energy and runaway spending that helped create them,” McConnell said earlier this month. “The Biden administration seems to be willing to try anything but walking back their own disastrous economic policies.”
Biden inherited from the Trump administration a budget deficit that was equal in size to 14.9% of the entire U.S. economy. But the deficit starting in the year that begins on Oct. 1 will be below 5% of the economy, putting the country on a more sustainable path, according to people familiar with the budget proposal who insisted on anonymity to discuss forthcoming details.
The planned deficit reduction is relative to current law, which assumes that some of the 2017 tax cuts signed into law by former President Donald Trump will expire after 2025. The lower deficit totals will also be easier to manage even if interest rates rise.
Still, Biden’s is offering a blueprint for spending and taxes that will eventually be decided by Congress and could vary from the president’s intentions.
The expected deficit decrease for fiscal 2022 reflects the solid recovery in hiring that occurred in large part because of Biden’s $1.9 trillion coronavirus relief package. The added jobs mean additional tax revenue, with the government likely collecting $300 billion more in revenues compared to fiscal 2021, a 10% increase.
Still, the country will face several uncertainties that could reshape Biden’s proposed budget, which will have figures that don’t include the spending omnibus recently signed into law. Biden and U.S. allies are also providing aid to Ukrainians who are fighting against Russian forces.