President Joe Biden will announce a series of tax change proposals that target high earners in his budget to be released Thursday, despite the measures having virtually no chance of becoming law with a Republican House.
Biden will release his annual budget on Thursday, a plan expected to slash the federal deficit by some $2 trillion over the next decade — a reduction that would still leave deficits high and rising in a threat to fiscal stability. To pay for the president’s budgetary priorities and trim the deficit, Biden will unveil several tax increases on those earning in excess of $400,000, according to a document provided to the Washington Examiner by a White House official.
BIDEN FACES IMPOSSIBLE BUDGET MATH EVEN WITH BIG TAX HIKES
Income taxes
Biden will propose raising the top marginal tax rate on individuals making over $400,000 per year to 39.6% — the rate it was before the Trump tax cuts, up from the current 37% rate. This would also likely apply to married couples filing jointly who earn over $450,000 annually, given that the administration has pitched similar increases in the past.
Capital gains
Like past Biden proposals, the president's budget would nearly double the capital gains tax.
The pitch would raise the tax on wealthy individuals (for those earning over $1 million) from 20% to 39.6%. Individuals making in excess of $1 million would also be subject to a federal rate of up to 44.6% as an existing Obamacare surtax on investment income is intended to be increased as well.
Corporate taxes
Biden also wants to raise the corporate tax rate from 21% to 28% (the 2017 tax cuts lowered the rate from 35%).
In a summary of the tax proposals, the White House refers to the 2017 tax cuts as an “enormous” tax break for corporations and asserts that instead of reinvesting in their companies and workers, much of the benefit went to executives and shareholders. Biden also wants to raise the minimum tax rate on U.S. multinationals’ foreign earnings from 10.5% to 21%.
Billionaire tax
The billionaire tax also made an appearance once again in Biden’s budget. The president will propose a 25% minimum tax on the wealthiest people in America. The White House said that the tax would only apply to those in the 0.01% of the highest earners.
During his State of the Union address earlier this year, Biden previously called for a tax on billionaires.
“Reward work, not just wealth. Pass my proposal for a billionaire minimum tax,” he told the crowd. “Because no billionaire should pay a lower tax rate than a school teacher or a firefighter.”
Carried interest
Carried interest is a type of taxable income generally earned by private equity managers that is subject to a lower rate than income.
Managers at private equity firms typically collect both fixed management fees (which are taxed as income) and a percentage of the investments’ profits (which is the carried interest in question). The management fees are taxed up to 37% as they are viewed as ordinary income in the eyes of the Internal Revenue Service. Carried interest, though, can be taxed at capital gains rates of much less, up to 23.8%.
Biden’s plan would eliminate the use of carried interest, which the White House characterizes as a “loophole.”