President Joe Biden’s upcoming budget proposal aims to cut deficits by nearly $3 trillion over the next decade, the White House said Wednesday.
That deficit reduction goal is significantly higher than the $2 trillion that Biden had promised in his State of the Union address last month. It also is a sharp contrast with House Republicans, who have called for a path to a balanced budget but have yet to offer a blueprint.
The White House has consistently called into question Republicans’ commitment to what it considers a sustainable federal budget. Administration officials have noted that the various tax plans and other policies previously backed by GOP lawmakers would add roughly $3 trillion to the national debt over 10 years.
“This is something we think is important,” White House press secretary Karine Jean-Pierre said about the plan Biden intends to discuss Thursday in Philadelphia. “This is something that shows the American people that we take this seriously.”
As part of the budget, the president already has said he wants to increase the Medicare payroll tax on people making more than $400,000 per year and impose a tax on the holdings of billionaires and others with extreme degrees of wealth.
The proposal would seek to close the “carried interest” loophole that allows wealthy hedge fund managers and other to pay their taxes at a lower rate, and would prevent billionaires from being able to set aside large amounts of their holdings in tax-favored retirement accounts, according to an administration official. The plan also projects saving $24 billion over 10 years by removing a tax subsidy for cryptocurrency transactions.
The official who provided the details spoke on condition of anonymity to preview the plan before its official release.
It also includes:
- Expanding the ability of Medicare to negotiate on pharmaceutical drug prices, with an estimated spending cut of $160 billion over a decade.
- Auctioning off rights to the radio spectrum, which would generate $50 billion.
- Taking steps to reduce identity theft and unemployment insurance fraud.
- Targeting insurance companies that overcharge Medicaid, with anticipated savings of $20 billion through repayments to the government.
- Ending subsidies valued at $31 billion for oil and gas companies.
- Scrapping a $19 billion tax break for real estate investors.
It’s a delicate time with the U.S. economy on edge because of high inflation. The government this summer is likely to exhaust its emergency measures to keep Washington running, setting up the risk of a default on payments along with cataclysmic series of job losses that could crash the economy.
Biden’s package of spending priorities is unlikely to pass the House or Senate as proposed. Senate Minority Leader Mitch McConnell, R-Ky., said Tuesday that the plan “will not see the light of day,” a sign that it might primarily serve as a messaging document going into the 2024 elections.
Rohit Kumar, a former McConnell aide who is now an executive with the tax consultancy PwC, said Biden’s plan does matter “in terms of putting ideas out there.” He said that if Biden won a second term, elements of this spending blueprint could be part of negotiations in 2025 about the expiring provisions in the 2017 tax cuts that President Donald Trump signed into law.
Given the scope of the deficit reduction in Biden’s proposal, Kumar said it was unlikely that the president’s plan would identify which parts of the expiring tax cuts he plans to keep, as the president has vowed no tax increases on anyone making less than $400,000. But while the White House has charged that Republican plans increase deficits by $3 trillion, about $2.7 trillion of that total comes from renewing all the Trump-era tax cuts that disproportionately favored the wealthy.
Biden’s budget proposal would reverse some of the 2017 law. It would increase the top marginal tax rate to 39.6% on income above $400,000. For households with $1 million in income, earnings from capital gains — such as stocks or property sales — would no longer enjoy a discounted tax rate compared to wages.
The president would increase the corporate tax rate to 28% and increase the tax rate on U.S. multinationals’ foreign earnings from 10.5% to 21%.
In February, the nonpartisan Congressional Budget Office estimated that the national debt held by the public will grow by more than $20 trillion over the next decade. The publicly held debt — which reflects the cumulative impact of yearly deficits — would be equal to 118% of U.S. gross domestic product, up from 98% this year. Biden’s budget would reduce the debt, though it would still be high relative to historical levels.
Republicans, newly in control of the House, are demanding sharp spending cuts. Biden has suggested that tax increases on the earnings and holdings of the country’s wealthiest households can bolster government finances and also improve Medicare and Social Security.
The president contended in a Monday speech that there are 680 billionaires in the United States and that many of them pay taxes at a lower rate than do families who think of themselves as being in the middle class. Biden said not to hold him to the precise number of billionaires, but that they could afford to pay more for the good of the country.
“No billionaire should be paying a lower tax rate than a fire fighter — nobody,” Biden said at a gathering of the International Association of Fire Fighters.