Biden budget taxes the rich, cuts deficit
President’s blueprint sets the stage for fight with Republicans over government spending.
WASHINGTON — President Biden unveiled a $6.8trillion budget blueprint on Thursday that would increase taxes on wealthy Americans and corporations, increase spending on social programs and trim the federal deficit by nearly $3 trillion over the next decade.
The plan has little chance of passing a divided Congress. It “will not see the light of day,” Senate Minority Leader Mitch McConnell (R-Ky.) has vowed.
But Biden’s budget is a statement of his values and priorities. By presenting a plan that includes tax increases on the wealthy as well as some spending increases, he is setting the stage for months of negotiations with Republicans, who have demanded deep spending cuts in exchange for dropping their threat to refuse to raise the nation’s federal borrowing limit on previous spending.
Biden, who is widely expected to announce his 2024 reelection bid in the coming weeks, presented his plan for the next fiscal year in Pennsylvania, a critical battle
ground state. The budget also doubles as a political messaging document for Biden, who is looking to sharpen a contrast with Republicans over fiscal responsibility.
The president wants the country’s wealthiest to foot most of the bill, an unmistakable preview of a populist reelection pitch.
“My budget reflects what we can do to lift the burden on hardworking Americans,” he told a crowd of union workers at the Finishing Trades Institute in Philadelphia. He promised his plan would also “generate economic growth.”
House Speaker Kevin McCarthy (R-Bakersfield), who is leading talks with Biden over raising the debt ceiling, called the budget “completely unserious” in a Twitter statement.
But Republicans have yet to release their own budget proposal, which Biden noted during his remarks in Philadelphia.
“I’m ready to meet with the speaker anytime,” he said. “Tomorrow — if he has his budget.”
Here’s a summary of Biden’s proposal:
Higher taxes for the rich, corporations
High earners would pay higher taxes under Biden’s proposed budget. His plan would raise $5.5 trillion in new revenue over the next 10 years, mostly by raising taxes on rich people and corporations.
The president’s plan would repeal some of the 2017 tax cuts signed into law by former President Trump. It would restore the top marginal tax rate to 39.6% (the current rate is 37%) on single filers making more than $400,000 and married couples making more than $450,000. For households worth more than $1 million, capital gains would be taxed at the same rate as their wage income. The plan would also raise the corporate tax rate from 21% to 28%.
Biden’s so-called billionaire tax would impose a 25% minimum income tax on the wealthiest 0.01% of Americans, a significant increase from the 20% minimum tax on multimillionaires and billionaires that he floated last year.
The president also wants to quadruple a new excise tax on corporate stock buybacks under the new plan. Biden’s Inflation Reduction Act requires companies to pay a 1% excise tax on purchases of their own stock to discourage them from using a maneuver that steers profits to their shareholders and boosts the stock price.
The budget would raise more federal revenue by ending lucrative tax breaks for oil and gas companies, which would total $31 billion in savings, according to the White House. It also claims to save $19 billion by halting a special tax subsidy for real estate investors.
Keeping Medicare solvent for 25 years
Biden wants to extend the solvency of Medicare by 25 years by raising tax rates on people earning more than $400,000 a year. The Medicare tax rate would increase from 3.8% to 5% on earned and unearned income for the wealthy. The Medicare trust fund, which is paid for by payroll taxes, is projected to run out in 2028 under current tax and spending levels.
His plan also proposes capping the price of certain prescriptions to $2 per month for Medicare recipients, including generic drugs used to treat chronic conditions such as high cholesterol and hypertension. Biden also wants to expand Medicare’s ability to negotiate lowering the cost for prescription drugs, which the White House said will cut federal spending by $160 billion over a decade.
Pressing status quo for Social Security
The White House said it was committed to strengthening Social Security but did not detail a solvency plan similar to the Medicare proposal. It instead allocated $1.4 billion (a 10% increase) to improve the agency’s staff and technology. Changes to Social Security are “not on the table,” Shalanda Young, director of the White House Office of Management and Budget, told reporters in a call previewing the plan on Thursday.
Biden has excoriated Republicans over Medicare and Social Security in recent months, citing a Republican senator’s 2022 call to sunset all federal programs every five years. Republican leaders have said in recent weeks that the two popular entitlement programs are off the table when it comes to slashing spending, but have yet to offer a plan on where they expect the cuts. Social Security and Medicare compose a large portion of the federal budget due to the nation’s aging population and increasing healthcare costs.
Child tax credit gets a bigger push
The president revived his pitch for family-focused and “care economy” policies that were core tenets of his initial “Build Back Better” plan but failed to win enough support to clear a Democratic-controlled Congress during his first two years in office.
He called for restoring the enhanced child tax credit, which cut poverty nearly in half when lawmakers gave the payment a pandemic-related boost in 2021. Biden wants to expand the credit from $2,000 per child to $3,000 per child for children 6 and older and up to $3,600 for children under 6. He also called for making the earned income tax credit expansion for childless workers permanent.
Biden also called for permanently making the credit refundable, which would allow even parents with no income to receive the full amount.
He proposed making permanent the expanded subsidies for people buying their own health coverage on the Affordable Care Act marketplaces, which were extended through 2025 in the Inflation Reduction Act.
Biden is also asking Congress to support up to 12 weeks for a national paid medical leave program, $400 billion in child-care subsidies and $300 billion for universal prekindergarten and expanding free community college. The budget allocates $150 billion over 10 years to improve and expand Medicaid home and community-based services and $100 billion in funding and tax incentives aimed at increasing the affordable housing supply.
Funding for border agents and military
The president is requesting a defense budget of $842 billion in the fiscal year of 2024, a 3.2% increase from fiscal year 2023 that includes $6 billion for continued support to Ukraine. The budget also allocates $25 billion for U.S. Customs and Border Protection and Immigration and Customs Enforcement and $535 million for border technology at and between ports of entry. It also includes funding to hire an additional 350 border agents.