Trillions at stake when Trump tax cuts expire next year
President Joe Biden’s top economic adviser said Friday that lawmakers should take advantage of a looming tax debate next year to try to reduce budget deficits by sharply raising taxes on corporations and the rich.
Under that plan, Biden would more than offset the cost of maintaining tax cuts for people earning $400,000 a year or less.
In a speech to the Hamilton Project at the Brookings Institution in Washington, Lael Brainard, who directs the White House National Economic Council, gave the most detailed explanation yet of how Biden would seek to shape what promises to be a multitrillion-dollar tax debate.
A batch of tax cuts signed into law in 2017 by then-President Donald Trump, who is facing Biden in a rematch this fall, is set to expire at the end of next year. It includes cuts for individuals at all income levels. Republicans built that expiration into the tax bill to reduce its projected cost to deficits and comply with congressional rules.
Brainard’s speech renewed Biden’s commitment to reducing taxes for middle-class Americans and for raising them on high earners. But her remarks expressed more concern about growing debt and deficits than the president and his aides had previously demonstrated when discussing the looming tax debate.
“At minimum, we should avoid making the fiscal hole created by Republican tax cuts deeper, by fully paying for any tax cuts that are extended,” Brainard said in remarks released by the White House. “And we should use the 2025 tax debate as an opportunity to meet our national needs by raising revenue overall by asking the wealthy and large corporations to pay their fair share.”
The comments reflect a growing effort by Democrats and Republicans to set the terms of what promises to be a major tax debate next year.
Trump and his congressional allies have sought to extend all of the expiring cuts, a move that the nonpartisan Congressional Budget Office said this week could add as much as $4.6 trillion to the federal debt over the course of a decade.
Biden has said repeatedly that he wants to extend only the individual cuts for households earning less than $400,000 a year. He would allow other cuts to expire. The Committee for a Responsible Federal Budget in Washington, a group dedicated to reducing deficits and the nation’s growing debt load, calculates that Biden’s extension of those provisions would most likely cost $1.5 trillion to $2.5 trillion over a decade.
Biden’s latest budget proposes nearly $5 trillion in tax increases on high earners and corporations. It also includes about $2 trillion in new spending programs.
In her speech, Brainard reiterated Biden’s calls for higher taxes on the wealthy and large corporations, including an increase in the corporate tax rate to 28%. That would be higher than the 21% that Trump’s law, the Tax Cuts and Jobs Act, ushered in but lower than the 35% rate that existed before the 2017 tax package passed.