Biden prepares first major tax increase since 1993
Unlike the $1.9 billion covid-19 stimulus law, the next move, which is expected to be even bigger, will not depend solely on government debt as a source of funding. While it is increasingly clear that tax increases will be a component – Treasury Secretary Janet Yellen said that at least part of the next bill will have to be paid and signaled higher taxes – key consultants are now preparing a package of measures that may include an increase in both corporate tax and higher income taxes.
As each tax and credit reduction has its own lobby to support them, changing fees implies many political risks. This helps to explain why the tax increases in the Bill Clinton reform in 1993 stand out from the modest changes made since then.
For the Biden government, the planned changes are an opportunity not only to fund major initiatives like infrastructure, climate and increased aid for the poorest Americans, but also to resolve what Democrats claim to be inequalities in the tax system itself. The plan will test Biden’s ability to hold Republicans and Democrats together.
“His whole view has always been that Americans believe that tax policy needs to be fair, and he has been looking at all of his policy options through that lens,” said Sarah Bianchi, head of US public policy at Evercore ISI and former economic advisor to Biden. “That’s why the focus is on addressing the unequal treatment between work and wealth.”
Although the White House rejected a tax on total wealth, as proposed by progressive Democratic senator Elizabeth Warren, the government’s current plan has the richest in its sights.
The White House is expected to propose a set of tax increases, mainly reflecting Biden’s campaign proposals for 2020, according to four people familiar with the discussions.
The tax increases included in any broader infrastructure and employment package are likely to include repealing parts of ex-President Donald Trump’s 2017 tax law that benefit wealthy corporations and individuals, as well as other changes to make the tax code more progressive, said people familiar with the plan.