San Diego Union-Tribune (Sunday)
BIDEN WANTS TO RAISE TAXES; TRUMP CUTS ARE STAYING
New president more likely to tinker with 2017 law, given constraints
Donald Trump has left the White House. But many of his signature tax cuts aren’t going anywhere.
Democrats have spent years promising to repeal the 2017 Tax Cuts and Jobs Act, which Republicans passed without a single Democratic vote and was estimated to cost nearly $2 trillion over a decade. President Joe Biden said during a presidential debate in September that he was “going to eliminate the Trump tax cuts.”
Biden is now in the White House, and his party controls both chambers of Congress. Yet he and his aides are committing to only a partial rollback of the law, with their focus on provisions that help corporations and the very rich. It’s a position that Biden held throughout the campaign and that he clarified in the September debate by promising to only partly repeal a corporate rate cut.
In some cases, including tax cuts that help lower- and middleclass Americans, they are looking to make Trump’s temporary tax cuts permanent.
Biden still wants to raise taxes on some businesses and wealthy individuals, and he remains intent on raising trillions of dollars in new tax revenue to offset the federal spending programs that he plans to propose, including for infrastructure, clean energy production and education. Much of the new revenue, however, could come from efforts to tax investment and labor income for people earning more than $400,000, in ways that are not related to the 2017 law.
Biden did not include any tax increases in the $1.9 trillion stimulus plan he proposed last week, which was meant to curb the pandemic and help people and companies endure the economic pain it has caused.
His nominee for Treasury secretary, Janet Yellen, told a Senate committee last week that the president would hold off on reversing any parts of the tax law until later in the recovery, which most likely means as part of a large infrastructure package that he is set to unveil next month. Republican lawmakers repeatedly questioned Yellen about Biden’s tax plans, warning that repeal of the 2017 cuts would hurt American workers and businesses and push companies to ship jobs overseas.
Yellen said Biden had made clear that he “would want to repeal parts of the 2017 tax cuts that benefited the highest-income Americans and large companies.” But she added that “he’s been very clear that he does not support a complete repeal.”
Biden could end up cementing as much of Trump’s tax cuts as he rolls back. To meet a budget constraint that was necessary to pass the 2017 law with no Democratic votes, Republicans set tax cuts for individuals to expire at the end of 2025. On Thursday, in follow-up answers to written questions from Sen. Chuck Grassley, R-iowa, Yellen said she would work with Congress to make tax cuts permanent for families earning less than $400,000 a year.
Such a move would most likely reduce the tax revenue that Biden could otherwise claim to raise from his proposed changes to the Trump tax by at least half and as much as two-thirds, according to calculations by The New York Times. The calculations used analyses from the congressional Joint Committee on Taxation, the Tax Policy Center, the Committee for a Responsible Federal Budget and the University of Pennsylvania’s Penn Wharton Budget Model.
All told, over a decade, Biden’s proposed changes to the law could net just $500 billion in additional revenue. In contrast, he has proposed roughly $2 trillion in tax increases unrelated to the law, by the Budget Model’s calculations.
Not all of Biden’s intentions for the law’s provisions are clear. In the campaign, he said he would remove a limitation that Trump placed on the deduction of state and local taxes from federal income taxes, known as SALT, a move that primarily hurt higherincome residents of high-tax states like New York and California.
Yellen did not commit to such a repeal last week, telling lawmakers she would “study and evaluate what the effect of the SALT cap has had on state on local governments and those who rely upon their services.” Repealing the cap would further reduce federal tax revenues.
The 2017 law cut taxes for individuals and lowered the corporate rate to 21 percent from 35 percent. It created a new deduction for owners of certain businesses, like limited liability companies, whose owners pay taxes on their profits through the individual tax code. It also overhauled how the United States taxes the income that companies earn overseas, which Republicans said would encourage them to invest and create jobs in
America.
Most American workers received at least a small tax cut under the law. Its benefits flowed heavily to high earners: The Joint Committee on Taxation’s initial estimates suggested that more than one-fifth of the tax savings from the law in 2021 would go to people earning $500,000 a year or more. That share is set to rise sharply by 2026 if the individual tax cuts expire as scheduled.
Democrats denounced the law as a giveaway to the rich, and it has struggled to attain widespread popularity. An online poll for The Times by research firm Surveymonkey found last month that Americans remained evenly split on whether they support or oppose the law. Only 1 in 5 respondents was certain of having received a tax cut from it.
During the presidential campaign, Biden proposed trillions of dollars in tax increases on corporations and the rich, but his plans stopped short of a full repeal of Trump’s tax law. He said he would raise income taxes to pre-trump levels only at the top bracket, an increase to 39.6 percent from 37 percent. He called for raising the corporate tax rate to 28 percent from 21 percent, where Trump set it — still short of the top rate of 35 percent that preceded the law.
Even Biden’s international tax plan, which is meant to encourage domestic investment and job creation while raising revenue from large corporations, would work within the boundaries of what Trump and Republicans did in 2017. Instead of scrapping the overhaul, Biden would double the rate of the tax — while eliminating a new exemption that Democrats say encourages corporate investment abroad.
Tankersley writes for The New York Times.