BIDEN SEEKS TAX HIKES ON WEALTHY
Revenue increases would go toward child care, education
President Joe Biden will seek new taxes on the rich, including a near doubling of the capital gains tax for people earning more than $1 million a year, to pay for the next phase in his $4 trillion plan to reshape the American economy.
Biden will also propose raising the top marginal income tax rate to 39.6 percent from 37 percent, the level it was cut to by President Donald Trump’s tax overhaul in 2017. The proposals are in line with Biden’s campaign promises to raise taxes on the wealthy but not on households earning less than $400,000.
The president will lay out the full proposal, which he calls the American Family Plan, next week. It will include about $1.5 trillion in new spending and tax credits meant to fight poverty, reduce child care costs for families, make prekindergarten and community college free to all, and establish a national paid leave program, according to people familiar with the proposal. It is not yet final and could change before next week.
The plan will not include an up to $700 billion effort to expand health coverage or reduce government spending on prescription drugs. Officials have decided to instead pursue health care as a separate initiative, a move that sidesteps a fight among liberals on Capitol Hill but that risks upsetting some progressive groups.
News of the tax provisions appeared to unnerve investors on Thursday, with stock markets giving up gains as investors absorbed details of Biden’s capital gains tax plans. The S&P 500 closed down 0.92 percent.
The plan will set up a clash with Republicans and test how far Democrats in Congress want to go to rebalance an economy that has disproportionately benefited high-income Americans.
Biden’s advisers are eyeing a wide range of possibilities for how to move the president’s economic agenda through Congress. They are holding out hope of reaching bipartisan agreement on at least some provisions, while preparing to bypass a Republican filibuster and pass much of the tax and spending agenda on a party-line vote using the parliamentary process known as budget reconciliation.
The president has broken
his economic plan into two parts. The first centers on physical infrastructure, like bridges and airports, along with other provisions such as home care for older and disabled Americans. The second part, details of which emerged on Thursday, focuses on what administration officials call “human infrastructure” — helping Americans gain skills and the flexibility to contribute more at work.
The challenges for Biden are apparent. The administration
has disappointed key Democrats, including House Speaker Nancy Pelosi, D-San Francisco. “Lowering health costs and prescription drug prices will be a top priority for House Democrats to be included” in the plan, she said.
Republicans have shown some willingness to negotiate with Biden on the first part of his agenda, including spending on roads, waterways and broadband Internet. But they have vowed to fight his tax plans, and they have shown little interest in the spending provisions contained in his latest proposal.
Conservative groups criticized Biden’s plans to raise taxes on high-earning individuals, and Senate Republicans unveiled their own infrastructure proposal to spend $568 billion over five years.
That contrasts with the president’s $2.3 trillion American Jobs Plan, which Biden outlined last month. Republicans cast Biden’s proposed increases as an attack on their party’s signature economic achievement under Trump, a sweeping collection of tax cuts passed at the end of 2017.
Lawmakers should work together to improve the nation’s infrastructure “without damaging the tax reform that gave us the best economy of my lifetime,” said Sen. Pat Toomey of Pennsylvania, the top Republican on the Senate Banking Committee.
The president’s latest proposals call for hundreds of billions of dollars for universal prekindergarten, expanded subsidies for child care, a national paid leave program for workers and free community college tuition for all.
The plan also seeks to extend through 2025 an expanded tax credit for parents — which is essentially a monthly payment for most families — that Biden signed into law last month.
Democrats on Capitol Hill have urged Biden to make that credit permanent. Analysts say the credit would drastically cut child poverty this year.