President Joe Biden’s White House economic team is determined to live up to its promise to raise taxes on the rich, encouraged by growing data showing how well the rich of America fared financially during the pandemic.
With the Republican and business lobby opposing the administration’s tax plans, Democrats must decide how ambitious they must be to revamp the tax code into what is almost certain to be their own account. Interviews with senior officials show that there is growing confidence in the White House that evidence of growing inequality will contribute to broad support for a tax-rich strategy.
Biden himself became convinced of the need and said last week that those earning more than $ 400,000 can do so expect to pay more taxes.
“2020 has really shown him that there are so many fragility in the whole of society” that needs attention, Heather Boushey, a member of the White House Council of Economic Advisers, said in an interview. The priority funding spending due to a shortfall in revenue from the 2017 Republican tax cuts ‘really required the president to sit down and reflect on the enormous needs, and on these issues that we are taxing,’ she said.
Behind the scenes, assistants worked on a proposal to pay for the long-term Biden agenda. Raising income and capital gains tax rates on top earners, along with levies on companies and an expansion of estate taxes, will help fund priorities such as infrastructure, climate change and childcare and home health care assistance.
Legislators and the government are leading the discussions on what measures could succeed later in the year. The Senate Finance Committee will hold a hear about the impact on employment and investment of the current US international tax structure.
‘Great reform’
Senior members of the administration, including David Kamin, deputy director of the National Economic Council, and Lily Batchelder, who has been appointed assistant treasurer for tax policy, have been working for years to raise revenue from the best Americans. . .
Kamin, working with Batchelder on potential reforms in a 2019 paper entitled ”Taxing the Rich: Issues and Options, ”indicated in an interview that the following options are under discussion:
- The removal of ‘fines’ for estates that revalue assets such as shares and real estate at market prices, rather than the original purchase cost, which reduces tax liabilities
- Capital Gains Tax for Wealthy Americans at Higher Income Tax Rates
- A minimum tax for large companies
‘The idea of finally eliminating a massive loophole, in that the highest-income Americans evade taxes on their wealth by addressing the increase in the base and then taxing capital gains as ordinary income, is an important reform of ours. system, which I think needs, ”Kamin said in the interview.
“These would be important achievements, which would fundamentally change the way our tax system treats the richest Americans and the largest businesses, so that they can not escape taxes the way they can now,” he said.
The administration is also looking at withdrawing a portion of former President Donald Trump’s income tax cuts, associates say.
“Anyone earning more than $ 400,000 will see a small to a significant tax increase,” Biden said in an interview with ABC earlier this month. “For those below the level, there is not a single cent extra federal tax,” he said.
Important aspects of the plan have yet to be outlined, including the details of the higher tax threshold. The White House made it clear last week that the amount of $ 400,000 applies to families, but Deputy Press Secretary Karine Jean-Pierre suggested on Friday that the level at which tax increases for individuals would begin has not yet been determined.
“It’s a little early – we’re still working through the process,” Jean-Pierre said.
2020 Profits
Wealth for America’s Top 10% of Households Rises $ 8 Billion
Source: Federal Reserve
The so-called K-shaped recovery, in which wealthier Americans thrived even as low-income and many middle-class workers suffered job losses, evictions, food insecurity, and health risks associated with personal work during Covid-19, strengthened the government’s intentions.
The richest 1% of U.S. households added more than $ 4 trillion to wealth last year as equities reached record highs and property value increased, fueled in part by record low interest rates. The bottom 50% saw their net worth gain at a much smaller $ 470 billion – and this was reinforced by the extraordinary revenue support provided in the March 2020 Cares Act.
A a new report from the left-wing Economic Policy Institute showed that 80% of job losses in 2020 are concentrated among the lowest 25% of wage earners, while workers in the upper half of the distribution have an increase in employment.
“It’s always true that recessions hit people with low and middle incomes harder, but I’ve never seen anything like it,” said Heidi Shierholz, the institute’s policy director and a former chief economist.
Republicans warn that higher taxes will deter the recovery. The U.S. Chamber of Commerce says levying levies on companies will reduce the ” United States a less attractive place to invest profits and locate corporate headquarters. ‘
Republican warning
“Whatever the new normal is after which we return to Covid-19, I think it’s important that the government stays as far out of the way as possible to make the economy work,” said Chris Campbell, a former Republican senator. said assistant who served in the treasury during the Trump administration.
Senate Minority Leader Mitch McConnell said last week that there would be no dual support for higher taxes, and predicted that Democrats would pass the reconciliation process – which allows bills to pass the Senate by a simple majority – for their suggestions.
One tax issue on which lawmakers from both parties agree is the possibility of tightening IRS enforcement. A watchdog report from the Treasury Department last week showed that the Internal Revenue Service did not collect more than $ 2.4 billion from wealthy individuals repaid by the federal government.
Biden’s Shift
A working paper from the National Bureau of Economic Research separately this month indicated separately that random IRS audits miss most tax evasion by foreign centers and transit companies such as partnerships and limited liability companies.
Biden’s current determination points to a shift in a political career over decades, with few deliveries of higher taxes. In the presidential campaign, he traces a distinction with the plans of liberal rivals for a wealth tax, and as vice president, he cut an agreement with Republicans in late 2012 makes permanent 82% of the tax cuts originally adopted by President George W. Bush.
But liberals are now completely behind his efforts.
“We have seen him propose, push for, sign and sell one of the most progressive pieces of legislation in three generations,” Senator Elizabeth Warren said in an interview, referring to the plan to alleviate the pandemic. “There is now momentum for real change, and tax policy is a critical part of the change.”
– With help by Laura Davison and Alexandre Tanzi
(Add context on wealth and tax avoidance in paragraphs before and after ‘Biden Shift’ subheading.)