Biden Budget calls for new benefits for families funded by taxes on the wealthy
Working families would get new tax cuts and help pay for childcare and health care, while the wealthy would get a slew of new taxes under President Joe Biden’s budget plan.
The budget, a wish list of policy goals released Thursday, has little chance of passing the Republican House of Representatives. The budget revives the Biden administration’s well-known proposals: paid family and sick leave for employees, childcare subsidies, universal kindergarten and expansion of the child tax credit. It would pay for these programs by raising taxes on the wealthy, including a new minimum income tax for billionaires and a quadrupling of last year’s new tax on stock buybacks.
Biden’s proposal lays the groundwork for high-stakes federal budget negotiations at a time when the U.S. has once again breached the borrowing limit set by Congress and is moving toward default later in the year. The country risks economic catastrophe if the government runs out of money and lawmakers fail to reach a deal that would allow the Treasury to borrow money again.
Many items in the tax proposal would directly affect household finances:
Extension of the child discount
Biden’s plan would restore the temporary tax credit changes made at the time of the pandemic, raising it from a maximum of $2,000 to $3,600 per child, and making its full value available to families whose incomes were previously too low was to qualify. The credit would also change from a single tax season payout to a monthly check worth up to $300 per child.
The expanded child tax credit was not in effect until 2021 and significantly reduced child poverty and hunger — both of which increased after the changes ended, research has shown.
Free kindergarten
The federal government would subsidize states that offer free pre-K classes for young children at Biden’s suggestion. The version of the plan put forward in 2021 would have saved an average family $13,000 a year, the White House estimated.
Paid family and medical leave
A new family and sick leave program would guarantee employees up to 12 weeks of paid time off to receive medical care for a serious illness or to care for children or sick relatives, plus one week of paid sick leave.
Permanent Care Subsidies
An extension of coverage of the pandemic-era Affordable Care Act would be made permanent. The additional subsidies have reduced premiums for people on Obamacare plans by an average of $800 a year, the White House said in a fact sheet about the plan. The grants now expire in 2025.
Lower drug costs
Medicare could negotiate prices for more drugs, reducing out-of-pocket costs for beneficiaries. The commercial drug market would also be affected, as drugmakers are not allowed to raise prices faster than inflation, and insulin costs will be capped at $35 per month, just as they currently are for Medicare recipients.
These and other programs would be paid for by numerous tax increases:
A new ‘billionaire tax’ on high earners
Biden would impose a 25% minimum income tax on the top 0.01% income earners — an effort to close loopholes that allow the extremely wealthy to pay a lower effective tax rate than middle-class workers. An earlier version of this proposal had called for a 20% minimum income tax for those with more than $100 million in wealth.
Increase corporate tax
A Trump-era tax cut would be partially reversed, raising the corporate tax rate from 21% to 28% — still less than the 35% companies paid before 2017. their foreign income, an increase of 10.5%.
Other taxes
- The 1% tax on stock buybacks, created last year by a Biden bill, would be increased to 4%.
- Trump’s capital gains tax cuts would be repealed, raising the top capital gains tax rate from 20% to 39.6%. The controversial “carry interest” loophole, which allows hedge fund managers to pay lower taxes, would also be eliminated.
- People earning $400,000 a year or more would see their Medicare taxes rise from 3.8% to 5%,
- The 1031 “like-kind exchange” loophole, a tax break that benefits real estate investors, would be eliminated.
- People earning $400,000 a year or more would face new restrictions on how much they can contribute to tax-advantaged retirement accounts.
- Losses when trading cryptocurrency would be treated more like other investments, preventing crypto traders from profiting from losses.
Opposition calls for austerity
Republicans, who have not yet submitted their own budget proposal, have said they will not raise or suspend the debt ceiling without spending cuts. For its part, the White House has said it will not negotiate the debt ceiling and that it must be raised unconditionally.
Both sides have ruled out cuts to Social Security and Medicare, and neither has shown any willingness to cut military spending. Other social programs have been the battlefield.
Republican proposals contrasted sharply with Biden’s plan. Republicans have pushed for tax cuts and said government programs, including aid to the poor, should be curtailed in the name of reducing deficits. They say their goal is to balance the budget, pointing to growing national debt.
The new taxes in Biden’s plan would more than cover social program spending, reducing the deficit by nearly $3 trillion over the next 10 years, the White House said.
Correction – March 10, 2023: This article was corrected after it misidentified which program Republican and Democratic leaders have agreed not to cut: It’s Medicare.