The budget that President Biden released on Monday projects to cut deficits by $3 trillion over a decade, and it does so with an approach that has become familiar: tax increases for companies and the wealthy.
The president previewed several of the proposals in his State of the Union speech last week and contrasted them with those of Republicans, who have called for extending most of the $2 trillion of tax cuts that former President Donald J. Trump signed into law in 2017. For Mr. Biden, tax policy has been at the center of his efforts to make the economy more equitable and to counter Republican tax proposals that Democrats deride as giveaways to the wealthy.
“Does anybody here think the tax code’s fair?” Mr. Biden said during remarks in New Hampshire on Monday. “I don\’t either.”
Overall, Mr. Biden is proposing $5 trillion in additional taxes on corporations and high earners over the next decade. Here’s what those increases would entail:
Corporate tax increases
The budget employs a mix of approaches to make American corporations pay more in federal taxes. That includes raising the corporate tax rate to 28 percent from 21 percent, which is the level that was set by the 2017 Tax Cuts and Jobs Act.
Mr. Biden also calls for increasing what’s known as the corporate minimum tax to 21 percent from 15 percent. That tax, which was passed by Democrats in 2022, applies to corporations that report annual income of more than $1 billion to shareholders on their financial statements but use deductions, credits and other preferential tax treatments to reduce their effective tax rates well below the statutory 21 percent. White House economists estimate increasing the tax could yield $137 billion in new tax revenue over a decade.
The president would also quadruple a 1 percent surcharge on corporate stock buybacks. That tax passed along party lines in 2022.
Corporate and private jet use also would face higher costs under the budget, which proposes raising fuel taxes “so that corporate executives and other wealthy Americans pay their fair share for the use of airspace and other public services related to air travel.” The budget also seeks to eliminate a tax break for corporate jet purchases.
And executive pay is also targeted in the budget. The White House proposes denying corporate deductions for all compensation associated with employees who earn more than $1 million. That goes beyond current tax laws, which only denies such deductions for top executives.
The budget also assumes that a global tax agreement the United States helped broker in 2021 will be enacted, despite the fact that Republicans have refused to entertain the new levy. Under that agreement, more than 130 countries pledged to enact minimum corporate tax rates of 15 percent that firms must pay on their foreign earnings. Mr. Biden wants the U.S. rate to be increased from 10.5 percent, which is not compliant with the agreement, to 21 percent.
Higher taxes for the wealthiest
Since the 2020 presidential campaign, Mr. Biden has pledged that none of his policies would increase taxes on households that earn less than $400,000. The latest budget keeps its laser focus on the wealthiest 1 percent.
Mr. Biden wants to raise the tax rate on capital gains such as stock sales for individuals who earn more than $400,000 to 39.6 percent. He also reiterated calls to close the so-called carried interest loophole that allows wealthy hedge fund managers and private equity executives to pay lower tax rates than entry-level employees.
The budget also includes another attempt at a version of a wealth tax, a complex concept that has long been an ambition of progressives.
The proposal would impose a 25 percent “billionaire tax” on individuals with wealth, defined as the total value of their assets, of more than $100 million. The goal is to prevent the wealthiest Americans from employing tax strategies that allow them to pay lower tax rates than those of middle-class households.
One of the challenges of so-called wealth taxes is figuring out how to determine the value of certain kinds of assets such as art, yachts and other holdings. A Treasury Department document outlining the mechanics of the tax proposals, said that a lot would be left to the discretion of the Treasury Secretary, who would have the authority to approve methods for assessing the value of “non-tradeable” assets. Treasury said that taxpayers would have the opportunity to appeal valuations and have their assets appraised.
Emboldening the Internal Revenue Service
One of Mr. Biden’s biggest priorities during his first term has been revamping the Internal Revenue Service, which received an $80 billion funding boost through the Inflation Reduction Act.
Republicans have been eagerly chipping away at those funds and have already succeeded in clawing back $20 billion of that money.
The White House budget restores those clawbacks and extends the tax collection agency’s modernization money with an additional $104 billion through 2034.
The Biden administration has argued that investments in the I.R.S. enable the federal government to collect more tax revenue without raising tax rates by compelling companies and wealthy tax evaders to pay what they owe. The Treasury Department has estimated that the so-called “tax gap” of revenue that goes uncollected was nearly $700 billion in 2021.
The White House estimated that the additional I.R.S. investments would create $237 billion in net savings over a decade.
Using taxes to shore up retirement programs
Mr. Biden is also calling for new efforts to improve the solvency of Social Security and Medicare, including making wealthy Americans pay more into the programs.
In the budget, he opposes benefit cuts for the programs and any additional contributions from workers earning less than $400,000 a year. On Monday, Shalanda Young, the White House budget director, implied that Mr. Biden would look to shore up Social Security in part by targeting a cap on income subject to the payroll taxes that feed the program. She said Mr. Biden would improve its solvency “by asking high-income Americans to pay their fair share. If you make a million dollars in this country, you are done paying your Social Security taxes sometime in February.”
The budget also calls for increasing the Medicare and net investment income tax rates by 1.2 percentage points for taxpayers with more than $400,000 of earnings.
Most likely dead on arrival
Many of Mr. Biden’s proposals have appeared in similar forms in his previous budgets, and administration officials acknowledged that even when Democrats controlled the House and the Senate it was not possible to pass a wealth tax.
The budget fell flat with Republicans in Congress on Monday. Senator Charles E. Grassley of Iowa, the top Republican on the Senate Budget Committee, described it as “chock-full of corner cutting to circumvent congressional spending caps” and warned that it “presents shortsighted plans to burn through Americans’ pocketbooks.”
The Trump campaign predicted, without offering an analysis, that Mr. Biden’s proposed tax increases would lead to the “immediate” loss of approximately one million jobs.
Jim Tankersley contributed reporting
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