President Joe Biden wants voters to believe his tax plans take from the rich to give to the poor, but in reality they rob us all to pay off the millionaires and billionaires who bankroll today’s Democratic Party.
“Taxes,” Biden said in hardscrabble Scranton, Pennsylvania, on Tuesday, where he returned to pretend he isn’t a money-larded creature of Washington, “are how we invest in the country.” Normally, this would be an absurd statement. Governments don’t invest in the economy; people do. But under Biden, the tax system has become a large vehicle for channeling investment. It should be noted, as an aside, that one should beware when a politician talks about “investments.” It is a fancy way of referring to spending. Biden is not investing, he is spending.
Both of Biden’s signature domestic achievements, the CHIPS Act and the Inflation Reduction Act, spend trillions of dollars not through government appropriations but through the tax code. The IRA alone expanded 22 separate tax credits costing more than a trillion dollars over 10 years. Corporate tax breaks alone have almost doubled under Biden.
Spending through the tax code isn’t a free lunch in which businesses get the capital they need to expand operations and investors get a smaller tax bill. But tax credits do not benefit all taxpayers equally. You need a big tax bill to benefit, and it is the wealthiest with the best lobbyists and tax lawyers who end up benefiting most from tax expenditures.
Biden supposedly tried to clamp down on big corporations that pay no taxes by including a 15% corporate alternative minimum tax in the Inflation Reduction Act. Biden now wants to raise that rate to 25% and extend it to billionaires.
But he can’t get the numbers to add up enforcing an alternative minimum tax on the wealthy and also keeping the value of all the new tax breaks he creates. So in the Inflation Reduction Act, Biden solved this problem by exempting many of the new and expanded tax credits from his new alternative minimum tax. The result is a nominal higher tax rate for industries Biden doesn’t like and lower tax bills for those that support his campaign.
It is overwhelmingly the wealthy who support the Democratic Party. Just 15 years ago, the wealthiest 10 congressional districts were distributed equally between the parties. Now Democrats dominate all 10.
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An ideal tax system is simple, transparent, neutral, and stable. Biden has taken our federal system in the opposite direction. He has added dozens of new tax breaks, making it more complicated. The rules needed to comply with his new alternative minimum tax are constantly evolving, making the system far less transparent. Companies and sectors that are awarded tax breaks are only those with the best political connections to the White House, making the system corrupt and biased. By narrowing the base, Biden has also made the system far less stable.
Biden cannot have it both ways. He can’t channel spending through the tax code without also enriching politically connected wealthy investors along the way. He can pass all the alternative minimum taxes he wants, but if he wants his tax credits to affect investment decisions, he is going to have to create loopholes for them.