President Biden wants to channel his inner Franklin D. Roosevelt and make every American a cradle-to-grave dependent on government. The main problem is that, even FDR’s historical New Deal couldn’t provide the jobs needed to put Americans back to work. It took a war to harness the American industrial giant during a post-Depression era when unemployment was still past 20 percent.
Nevertheless, President Biden wants to impose the biggest tax hike since his Democrat predecessor Bill Clinton in 1993 — which passed the House by two votes and a tie-breaking vote by the Vice President in the Senate.
Here’s what the President will ask Congress to approve:
- A raise of the corporate tax rate to 28% from 21%
- A higher capital-gains tax
- Expanding the estate tax coverage to provide less tax exemption for wealthy inheritors
- A higher capital-gains tax rate for people earning at least $1 million
- Reducing or paring back tax advantages for those who own limited-liability companies or partnerships
- Raising the income tax rate on individuals earning more than $400,000
Each of those measures is a rollback from the Trump-era tax reform. The good news is that an independent analysis by the Tax Policy Center estimated that those increases would raise $2.1 trillion over the next decade. The bad news is that the 2021 deficit is surpassing $3 trillion.
Even the average householder knows that the way to stop accumulating debt is to stop spending and pay down the debt on a budget. The budget has to be based on spending less than the income.
Look for yet another Covid-19 relief bill. Critics say that the bill is less about Covid-19 and more about a wish-list of socialist spending programs. There is no Republican support for plunging the country into deeper debt or imposing crippling taxation on businesses as the economy begins bouncing back.
Also, look for easy passage in the House and the Senate bypassing the filibuster rule with a simple majority vote because of the rule on government financing bills. So, at least one Democrat, moderate Senator Joe Manchin from West Virginia must vote the party line if this tax raise can make it to the Oval Office.
However, there may be trouble on the horizon as President Biden’s repeated pledge not to raise taxes on middle-income people could come back to bite him. George H.W. Bush lost his reelection bid after his famous “Read my lips: No new taxes.” Candidate Joe repeatedly claimed that those earning less than $400,000 will not see “one single penny in additional federal tax.”
The problem is that according to White House press secretary Jen Psaki, the President’s $400,000 threshold for tax increases doesn’t apply to individuals, only to families. When Psaki was pressed on that “clarification,” she declined to specify a threshold for individual workers.
The bottom line is that the new tax hike will affect two-partner families whose combined income crosses the $400,000 threshold. So, the “not one single penny” boast isn’t air-tight. President Biden admitted that his plan would bring tax increases to some who earn $200,000.