President Joe Biden is reportedly planning the largest hike in federal taxes in almost three decades to fund a long-term economic recovery program to follow in the footsteps of the recently passed $1.9 trillion stimulus package.
Unnamed sources confirmed the plans to Bloomberg News over the weekend, reportedly indicating that the major tax hike — the first since 1993 — is expected to pay for key Biden administration initiatives such as "infrastructure, climate, and expanded help for poorer Americans."
But the sources said the planned changes are not designed to fund only the key priorities of the administration. With the tax hike, Biden's team hopes to address what Democrats argue are "inequities in the tax system itself." According to the Bloomberg report, the changes include:
- Raising the corporate tax rate to 28% from 21%
- Paring back tax preferences for so-called pass-through businesses, such as limited liability companies or partnerships
- Raising the income tax rate on individuals earning more than $400,000
- Expanding the estate tax's reach
- A higher capital gains tax rate for individuals earning at least $1 million annually
Bloomberg cited an independent analysis of the plan conducted by the Tax Policy Center, which assessed it would raise taxes on American citizens by $2.1 trillion over 10 years. The group originally projected the plan would raise taxes by $4 trillion over a decade, but revised its forecast last November.
The plans are unsurprising coming from the Biden administration and progressive Democratic lawmakers, who have already shown a willingness to raise taxes to accomplish their policy goals. Democrats snuck $60 billion in tax hikes into the coronavirus relief bill even as the country faces continued economic difficulty as a result of the pandemic.
However, despite falling in line with Biden's campaign promises and demands from progressive lawmakers, any major tax hikes may face an uphill battle in Congress. Tax hikes, especially if they result in a repeal of former President Trump's 2017 tax cuts, are a non-starter for Republicans. Likewise, moderate Democrats have shown some reluctance to the idea.
Moderate Democratic Sen. Joe Manchin (W.Va.) previously told The Hill repealing Trump's tax cuts would be a "ridiculous" idea, though he later added, "Everything's open for discussion."
Then last month, an anonymous Democratic House member told The Hill the government should not be raising taxes.
"People would accept the corporate tax raised a few points, but beyond that you're going to have problems, especially in the middle of an economic crisis," the lawmaker reportedly said.