Biden’s tax increases include hidden costs for the middle class, critics say
President Biden’s proposed tax increases for corporations and the wealthiest Americans get most of the attention, but many other planned tax increases would affect a broader range of taxpayers, analysts say.
The president’s budget would allow Trump-era tax cuts to expire, raise the top marginal tax rate for ordinary income from 37% to 39.6%, double taxes on investors’ capital gains and qualified dividends. of more than $ 1 million, and would require a “death tax.” on certain inherited assets.
Beyond those proposals, the budget would repeal some tax credits for oil and gas companies totaling $ 17.8 billion over five years. Revocation of those credits “would put upward pressure on fuel prices,” according to the National Taxpayers Union Foundation.
Prices at the pump are already up almost 30% this year.
Inflation is hitting Americans’ wallets too, hitting a 13-year high. Republicans argue that Biden’s massive new spending proposals would only worsen inflation and cost jobs.
“Inflation is twice as high as wage growth,” Rep. Kevin Brady, R-Texas, said in the House of Representatives this week. “In fact, for Americans, their pocketbook, their paycheck has actually decreased in purchasing power since President Biden took office. Many Americans fear the impact of rising prices and a slow-growing economy when high sugar wears off from all the COVID stimulus, which is exactly what President Biden’s budget admits it will do. “
Brady, the top Republican on the House Ways and Means Committee, has said repealing the 2017 tax cuts would cost 6 million jobs in America over a decade.
“That means a middle-class family of four making just $ 73,000 will see their family budget robbed by $ 20,000 over time,” Brady told Treasury Secretary Janet Yellen at a hearing this month.
While the wealthiest Americans would be the hardest hit by the president’s proposal to increase corporate taxes, his plan would also end up hitting about three-quarters of middle-class families as companies seek to offset those costs, according to the left-wing Fiscal Policy Center. at the Urban Institute.
“That’s primarily because, as workers, they would bear some of the burden of those corporate tax increases through lower wages,” wrote senior fellow Howard Gleckman in a blog post. “About three-quarters of those households would see their after-tax income drop compared to current law.”
Biden has proposed increasing the corporate tax rate from 21% to 28%. The 2017 tax law reduced the rate from 35% to 21%, one of the highest among developed countries.
In total, Mr. Biden is proposing more than $ 3 trillion in tax increases to pay for higher spending on paid leave, child care, healthcare, education, “green” energy, and other initiatives.
When the president announced a tentative bipartisan deal with senators this week on $ 559 billion in new infrastructure spending, Biden stressed that there would be no new taxes to pay for it. The blanket proposal is nearly $ 1 trillion.
“There is no increase in gas taxes, there are no fees for electric vehicles,” Biden said.
Conservatives reply that the bill will expire all taxpayers.
“This framework isn’t about roads and bridges – it’s about buying votes and clearing the way for Democrats to move their $ 3 trillion tax increase through reconciliation,” said Grover Norquist, president of Americans for Tax Reform. .
He said House Speaker Nancy Pelosi and Senate Majority Leader Charles E. Schumer “made it clear that they will hold this framework hostage until they get their overspending wish list.”
White House officials insist that Biden’s agenda would not increase taxes on the middle class. White House press secretary Jen Psaki still described Friday that the administration’s plans affect only the wealthiest Americans.
“The President believes that raising the corporate rate back to where it was in the first year of the George W. Bush administration [and] Asking the people in the top 1% of Americans to pay more to pay for these historic investments, to pay for an extension of the child tax credit, to make sure children have access to universal pre-K, is something we should do because it is correct the correct policy, ”said Ms. Psaki. “In addition, it will help our country move forward.”
But the administration is also receiving criticism from some Democrats. House Agriculture Committee Chairman David Scott of Georgia this month opposed Biden’s proposal to change capital gains taxes on inherited property. He said it could cause major tax increases for farmers and small businesses in rural America.
“Any increase in the inheritance tax for those who seize farmland is unsustainable and will put further pressure on an agricultural economy that is only now beginning to recover from the strain of the pandemic,” Scott told the president in a letter. . “The possibility of capital gains being imposed on the heirs upon the death of the owner would impose a significant financial burden on these operations.”
Under Biden’s proposal, people who inherit assets of more than $ 1 million would have to pay capital gains taxes on the full appreciation of the value from the time the assets were purchased by the original owner. Currently, they pay taxes on the appreciation that occurs after inheriting the property.
The Treasury Department has projected that the proposed increase in capital gains taxes would raise $ 322.5 billion within a decade.
Brady said that the management-backed global minimum tax of 15% for international corporations, along with the 28% desired by Mr. Biden for companies operating in the US, “will make the United States even less competitive and will generate jobs, manufacturing, research and investment. Exterior.”
The richest democracies in the Group of Seven, including the US, agreed to the global minimum tax on international corporations at a summit this month. The goal is to prevent companies from shifting their operations to lower-tax countries in what Yellen has called a “race to the bottom.”