Report: Biden Is Planning the First Major Tax Increase in 30 Years
Someone has to pay for the party, and as President Joe Biden looks to use the massive $1.9 trillion federal stimulus bill that Congress just passed as a precursor to even more spending, that someone will be American taxpayers, according to a new report.
Biden is looking at higher personal and corporate tax rates in a package that Bloomberg billed Monday as the “First Major Tax Hike Since 1993.”
Bloomberg said that according to its sources, which it did not name, among the proposals being considered are increasing the corporate tax rate from 21 percent to 28 percent, increasing income tax rates for individuals earning more than $400,000 and expanding the estate tax.
The Biden camp labeled its efforts an exercise in fairness, according to the report.
“His whole outlook has always been that Americans believe tax policy needs to be fair, and he has viewed all of his policy options through that lens,” Sarah Bianchi, head of U.S. public policy at Evercore ISI and a former economic aide to Biden, told Bloomberg. “That is why the focus is on addressing the unequal treatment between work and wealth.”
Biden openly campaigned on raising taxes.
The Tax Policy Center has estimated that if the president were to enact everything he proposed, it would bring in $2.1 trillion over a decade. Bianchi said she thinks the final amount will be closer to $500 billion, a level where she said congressional Democrats are comfortable.
Republicans were unable to block the massive COVID-related bill because of the tactics Democrats used to get it through the Senate.
This time, Republicans may be able to fight back and have signaled that intention.
“We’ll have a big robust discussion about the appropriateness of a big tax increase,” Senate Minority Leader Mitch McConnell said last month, according to Bloomberg.
Republican Rep. Kevin Brady, the ranking Republican on the House Ways and Means Committee, said, “There seems to a be a real drive to tax investment of capital gains at marginal income rates,” and he called that a “terrible economic mistake.”
The 1993 bill hiking taxes cleared the House by two votes and required then-Vice President Al Gore to break a Senate tie.
The political dynamics of 2021 are even more daunting, one commentator noted.
“I don’t think it is an understatement to say the current partisan environment is more severe than 1993” Ken Kies, managing director of the Federal Policy Group, told Bloomberg. “So you can draw your own conclusions” about a tax deal in 2021.
What? You thought we could spend 1 Trillion here…..2 Trillion there and it was all free? #OpenBorders, Closed schools, rising gas prices and now a tax increase…..https://t.co/HqZ7KFuJf1
— Andrew Wilkow (@WilkowMajority) March 15, 2021
Although the plan will be pushed as making wealthy individuals and corporations pay their fair share, Americans should understand that any tax increase will have a broad impact, said Daniel Morris, a CPA in San Jose, California.
“For example, corporations do not pay tax. Only people can pay a tax,” Morris told Accounting Today. “Corporations may write the [tax] check but people pay them: Customers pay them through higher prices, employees pay them through lower wages and investors pay them through lower returns. This is a political, emotional item.”
When Trump lowered corporate Tax I was able to buy a much needed Truck for my company, raise pay to all of my employees, and match up to 3% in a 401k for all employees.
Biden’s 7% tax increase will have me look to see if I can still afford to match them for their retirement.
— Dr. Van (@Paul13Jean) March 15, 2021
Although the White House is planning to target a tax increase to take effect next year, the political dimension of any increase could put off the debate for a couple of years, according to Morris Armstrong, an accountant and investment adviser in Cheshire, Connecticut.
“Remember that 2022 is an election year. Who wants to have opponents say, ‘You raised taxes!?’” Armstrong told Accounting Today. “I think that if any changes occur of any significance, it’ll be [in] the window of 2023.”
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