President Joe Biden’s economic team at the White House is determined to fulfill its campaign commitment to raise taxes on the rich, encouraged by rising data showing how well the wealthy Americans did financially during the pandemic.
With opposition from Republicans and the business lobby to the administration’s tax plans, Democrats must decide the ambition to try to renew the tax code in what is almost certain to be an individual bill. Interviews with senior officials show there is growing confidence in the White House that evidence of rising inequality will translate into broad popular support for a tax strategy for the rich.
Biden himself was convinced of the need and said last week that those earning more than $ 400,000 can they expect to pay more taxes.
“By 2020 it really showed him that there were so many of the fragility of society” that needs to be addressed, Heather Boushey, a member of the White House Council of Economic Advisers, said in an interview. Funding spending priorities, given the lack of revenue from Republican tax cuts in 2017, “have really required the president to sit down and think about both the enormous needs and these issues of how we tax.” he said.
Behind the scenes, helpers have been working on a proposal to pay for part of Biden’s longer-term agenda. Increasing the rates of income taxes and capital gains on key employees, along with corporate tax breaks and property tax increases, would help fund priorities such as infrastructure, climate change and employment assistance. child care and home care.
Legislators and the administration are intensifying discussions on what measures could be taken later in the year. The Senate Finance Committee will hold one on Thursday hearing on the impact on employment and investment of the current US international tax structure.
“Major reform”
Senior members of the administration, including David Kamin, deputy director of the National Economic Council, and Lily Batchelder, who has been named deputy secretary of the Treasury for fiscal policy, have been working for years on options to increase northern revenues. -more affluent Americans. .
Kamin, who with Batchelder outlined possible reforms in a 2019 document called “Monitoring the Rich: Problems and Options, ”he noted in an interview that the following options are among those being discussed:
- Elimination of the “intensification of the base” of farms, which revalues assets such as stocks and real estate at market prices, instead of the original purchase cost, reducing tax liabilities
- Taxing the Gains of Wealthy Americans on Income Tax Rates, Which Are Higher
- A minimum tax for large companies
“The idea of definitively eliminating what is a massive gap, as higher-income Americans evade taxes on their wealth by tackling the base and imposing capital gains as ordinary income, is a major reform of our system, which I think is necessary, ”Kamin said in the interview.
“These would be important accomplishments, which would fundamentally change the way our tax system treats the richest Americans and the largest corporations so that they can’t escape taxes the way they can now,” he said.
The administration is also considering reversing some of former President Donald Trump’s income tax cuts, aides say.
“Anyone earning more than $ 400,000 will see a small to significant tax increase,” Biden said in an interview with ABC earlier this month. For those below that level, there will be “not a penny in additional federal taxes,” he said.
The main aspects of the plan have not yet been detailed, including the specifications for the higher tax threshold. The White House clarified last week that the $ 400,000 figure applies to families, but deputy press secretary Karine Jean-Pierre suggested Friday that the level of tax hikes for to people.
“It’s a little early, we’re still working on the whole process,” Jean-Pierre said.
2020 earnings
The wealth of 10% of American households increased by $ 8 trillion
Source: Federal Reserve
The so-called The K-shaped recovery, in which the richest Americans thrived even when low-income workers and many middle-class workers suffered job losses, evictions, food insecurity, and health risks associated with in-person work during Covid-19, has reinforced the administration’s intentions.
The richest 1% of U.S. households added more than $ 4 trillion in wealth last year as stocks hit all-time highs and property values rose, fueled in part by interest rates. ‘minimum interest. The bottom 50% saw its net worth gain by about $ 470 billion much lower, which was bolstered by the extraordinary income support provided for in the March 2020 Care Act.
A a new document from the Institute of Economic Policy, on the left, showed that 80% of job losses in 2020 were concentrated among the lowest 25% of wage earners, while workers in half top of the distribution had gains in employment.
“It’s always true that recessions affect people with low and middle incomes the most, but I’ve never seen anything like it,” said Heidi Shierholz, the institute’s policy director and chief economist at the Department of Labor.
Republicans warn that higher taxes will slow the recovery. The U.S. Chamber of Commerce says raising taxes on companies “will make that United States a less attractive place to invest profits and locate corporate headquarters ”.
Republican warning
“Whatever new normalcy we return to after Covid-19, I think it’s important for the government to stay as far away as possible to allow the economy to find its footing,” said Chris Campbell, a former Republican of the Senate aide who served in the Treasury during the Trump administration.
Senate Minority Leader Mitch McConnell said last week that there would be no bipartisan support to raise taxes and predicted Democrats would use the reconciliation process – which allows bills to pass the Senate with a majority. simple – for your proposals.
One of the tax issues on which lawmakers on both sides agree is the possibility of tightening the IRS enforcement. A Treasury Department report showed last week that the Internal Revenue Service has been unable to raise more than $ 2.4 billion from wealthy people who owe subsequent taxes to the federal government.
Biden’s Shift
A working paper from the National Bureau of Economic Research this month stated separately that IRS random audits lack most tax evasion through offshore centers and transportation companies, such as corporations and limited liability companies.
Biden’s current determination marks a shift in a decades-long political career, with few episodes of momentum on tax increases. In the run-up to the presidential campaign, he made a distinction with Liberal competitors ’plans for a wealth tax and, as vice president, closed a deal with Republicans in late 2012 to make permanent 82% of the tax cuts originally approved by President George W. Bush.
But the Liberals are behind their efforts now.
“We have seen him propose, fight, sign and sell one of the most progressive legislation in three generations,” Senator Elizabeth Warren said in an interview, referring to the pandemic relief plan. “Now there is a push for real change, and fiscal policy is a key part of that change.”
– With the assistance of Laura Davison and Alexandre Tanzi
(Add context on tax evasion and rich in paragraphs before and after the subtitle “Biden Shift”.)