Biden’s $6 Trillion Spending Plan Assumes Higher Taxes
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- Joe Biden unveiled his budget proposal, a sweeping $6tn spending package
- The plan, which includes retroactive tax increases, would need to pass Congress
US President Joe Biden, on Friday, unveiled his proposed budget for the fiscal year 2022. The spending amounts to $6tn and calls for increases in funds for education, healthcare, and sustainable energy. The proposal by the Biden administration for the year starting Oct 1 assumes a sharp rise in taxes on corporations and high-income households.
For the cost to be covered, the corporate tax rate would increase to 28% from 21%. The capital gains tax rate increase, according to the budget, took effect in late April, meaning that a retroactive change would require high-income investors to realize gains at the higher tax rates if Congress agrees to the changes. Joe Biden’s plan intends to raise the top tax on capital gains to 43.4% from 23.8% for households with income over $1mn a year.
The higher taxes in the forthcoming fiscal year’s budget are part of the President’s American Families Plan, which calls for spending of $1.8tn on child care, education, and paid leave. Still, the retroactive effective dates and the tax rates themselves must first be approved by Congress to be passed in the budget. If the capital-gains changes are given a green light, they would yield as much as $322bn in revenue.
The President’s Proposal: Disagreement Still Evident
The $6tn budget, proposed by the White House, seeks to reshape the US economy and boost the welfare system as well as strengthen the American presence abroad. The Biden administration is seeking $1.52tn for military and domestic programs, an 8.6% increase from the $1.4tn enacted in the current fiscal year. Broadly, the plan stacks together with the infrastructure proposal of about $1tn, $1.8tn of spending on child care and education, and $1.5tn in proposed discretionary spending.
“I released my budget for the upcoming fiscal year,” Mr. Biden said Friday on Twitter. “It builds on the progress we’ve made over the last few months and makes historic investments that will help our nation build back better for decades to come.”
While the President will depend on Congress to enact his agenda, key lawmakers, including some Democrats, have already disagreed over the proposed retroactive tax increases. Republicans have objected to the changes on taxes in general, saying higher taxes will weaken the ability of US companies to be competitive on a global scale. They also criticized Mr. Biden for spending $1.9tn on the coronavirus relief package, which was approved with every Republican voting against the legislation.
The US Treasury Secretary, Janet Yellen, has been heaping pressure on Congress to approve the budget, proposed by the White House. “The president’s proposal, you’ll see, will have a temporary period of spending and permanent tax increases that, beyond the budget window, will result in lower deficits and more tax revenue to support those expenditures,” Ms. Yellen told lawmakers Thursday. “I believe it is a fiscally responsible program.”
Passing a budget in Congress could be done by the same procedure Democrats used when they passed Joe Biden’s top legislative priority, the coronavirus fiscal package. The process, called reconciliation, allows
lawmakers to pass legislation directly related to the budget with a simple majority, instead of the needed 60 votes.
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