Getting Biden's capital gains tax through congress is slim to none: Federated Hermes' Orlando
President Joe Biden will unveil on Wednesday a sweeping US$1.8 trillion plan to expand educational opportunities and child care for families, funded in part by the largest tax increases on wealthy Americans in decades -- the centerpiece of his first address to a joint session of Congress.
Called the American Families Plan, Biden’s third major legislative proposal combines US$1 trillion in spending with US$800 billion in tax cuts and credits for middle- and lower-income families.
The plan would make pre-kindergarten and community college free across the country, extend the child tax credit through 2025 and make permanent an expansion of the earned income tax credit to childless adults with low incomes, provide direct support to families for child care, finance teacher training and create a national paid family leave program.
The proposal follows on the heels of a US$2.25 trillion infrastructure plan that has yet to be taken up by Congress and a US$1.9 trillion pandemic relief plan that Biden has signed into law. Together, the measures would remake the U.S. tax code and social welfare programs, vastly expanding federal support even for families that consider themselves upper-middle class while substantially shifting the overall tax burden to the wealthy.
“The president has been clear that our tax system is broken when a hedge fund manager making hundreds of millions of dollars is paying taxes at a lower rate than the janitor working in his office or the housekeeper at his mansion,” White House senior adviser Anita Dunn wrote Tuesday in a memo obtained by Bloomberg News. “And he’s going to take steps -- steps which are supported by the American public -- to address the fairness in the tax code.”
Taken together, Biden’s proposals illustrate the president’s ambitions after nearly 100 days in office. Elected to pull the U.S. out of the coronavirus pandemic and its associated economic crisis, Biden now seeks to use the presidency to reshape and reorient the economy and the lives of middle-class Americans.
Making the earned income tax credit expansion permanent would help an estimated 17 million low-income workers, while extending the child tax credit would benefit an estimated 66 million kids, the White House said.
Biden’s tax hikes include raising the top rate for individuals back to 39.6 per cent, changing the treatment of capital gains so that wealthy people don’t benefit from lower rates on their investment income, eliminating the so-called “carried interest” provision that benefits fund managers, and greatly increasing funding for the Internal Revenue Service to enforce tax collection and audit wealthy taxpayers.
His proposals are uncertain in Congress, where Democrats hold a working Senate majority only by virtue of Vice President Kamala Harris’s tie-breaking vote.
Dunn’s memo cited a handful of polls showing that the majority of Americans support measures such as raising the corporate tax rate and capital gains taxes on people earning more than US$1 million a year.
‘Key’ to Future
Another White House aide, David Kamin, the deputy director of the National Economic Council, described Biden’s latest proposal as a plan aimed at improving American child-rearing and education and thus the country’s very future.
“There is very good evidence, at this point, that policies like the child tax credit end up in better outcomes for kids,” Kamin said in an interview. “You can look at it in terms of test scores, in terms of future earnings. So, these are important ways of helping families right now, but they’re also key to the future.”
Biden will outline his latest plan during his prime-time speech, scheduled to begin at 9 p.m. EDT on Wednesday, when he’ll also celebrate early accomplishments of his presidency including an accelerated vaccination campaign that has helped reduce U.S. Covid-19 cases and deaths. He’ll also discuss his proposals to combat climate change and his foreign policy, particularly the U.S. relationship with China, a person familiar with the speech said.
His ambitions face a tough audience in the narrowly divided Congress, with Republicans already balking at any tax increases and Senate Minority Leader Mitch McConnell calling the president’s latest proposal a “liberal wish list.” Without a vote to spare in the Senate, Biden must keep Democrats united to pass the package in any form, and he’ll need to both assure moderate Democrats up for re-election in 2022 that his proposals won’t be a liability while also appeasing the liberal wing of his party.
Some progressive House lawmakers have already expressed frustration that the American Families Plan doesn’t include more provisions to lower health-care costs or expand health insurance coverage.
A key lawmaker, Democratic Senator Joe Manchin of West Virginia, suggested Tuesday he is cool to tax increases other than raising the rate for corporations to 25 per cent, saying he first wants to explore why the government doesn’t already collect as much as it’s owed.
“Don’t you think we ought to figure out why we’re not collecting what we’re asking for and what people owe?” he said. “I want to figure that out first.”
The latest plan does not propose to expand the estate tax, a promise from Biden’s 2020 campaign. All of the new programs he envisions would unfold over a 10-year period.
In assembling Biden’s latest proposal, White House aides sought to ensure that each line item enjoyed decent support among congressional lawmakers, said one Biden ally. That consideration contributed to an estate-tax increase falling out of the plan.
Biden aides were equally wary of doing too much on health care. Any changes would have added to the cost of the proposal, and the White House is also concerned that the issue could become a political vulnerability for Democrats, as it was after the passage of the Affordable Care Act in 2010.
The only health-care provision is a proposal to extend additional tax credits from the pandemic relief law to help middle-income people pay for Obamacare plans.
Biden’s televised speech -- the equivalent of a State of the Union address, which won’t take place until his second year in office -- will bring home to viewers both the new political reality of Washington and the continuing pandemic.
He’ll speak in the House chamber to an audience at less than a fifth of its capacity, because of concerns about coronavirus transmission. But for the first time in American history, two women will stand behind the president on the House rostrum -- Harris and House Speaker Nancy Pelosi.
--With assistance from Erik Wasson.
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