US debt-ceiling deal dooms Biden's revolutionary tax plans
Send a link to a friend
[June 02, 2023]
By David Lawder
WASHINGTON (Reuters) - U.S. President Joe Biden's 2020 campaign promise
to make wealthy Americans and corporations pay more in taxes to finance
a range of social priorities breathed its last gasp, at least for this
presidential term, with the debt ceiling deal he struck with Republicans
on Saturday.
The deal to cap discretionary spending and suspend the debt ceiling
contains no tax rate changes to raise revenue; it also slashes new
funding Biden had allocated to the hollowed-out Internal Revenue
Service. The agreement caps Republicans' successful defense of the
debt-boosting 2017 Trump tax cuts against withering criticism from Biden
and several attempts by his Democrats to reverse them for wealthy
Americans.
Barring an unlikely Democratic sweep of the White House and both
chambers of Congress in 2024, major changes to the U.S. tax code are now
seen as largely off the table until the end of 2025, when the 2017
individual tax cuts expire. Then, tax experts predict lawmakers will be
forced to agree on a major tax revamp.
"Things are getting set up for a big fiscal cliff in 2025. That's the
next opportunity for major changes," said William McBride, vice
president of federal tax policy for the Tax Foundation, a conservative
think tank in Washington.
![](http://archives.lincolndailynews.com/2023/Jun/02/images/ads/current/humanesociety_sda022411.png)
Polls show the idea of fighting glaring income inequality with tax
increases on the wealthy and corporations is hugely popular with
Democratic and Republican voters.
TAX CHANGES ARE TOUGH
Biden's unrealized campaign tax pledges illustrate the political
difficulty of changing the U.S. tax code, barring a commanding majority
in Congress.
His $4 trillion, two-part "Build Back Better" plan included
infrastructure, clean energy incentives, workforce development, child
care, paid family leave, free community college, expanded child tax
credits and other initiatives.
He proposed over $3.5 trillion in new taxes, including raising the
corporate rate to 28% from 21% and returning the top individual rate to
39.6% from 37% and taxing capital gains at those rates for Americans
earning over $1 million. He promised no increases for those earning
under $400,000 a year.
But opposition from Republicans and Democratic senators Joe Manchin and
Kyrsten Sinema, now an Independent, forced Biden to scale back his
revenue plans. He did manage to win new cryptocurrency tax reporting
rules in the infrastructure bill and a new 15% corporate alternative
minimum tax in the climate-focused Inflation Reduction Act, to achieve
$238 billion in deficit cuts over 10 years.
Biden presented his tax hikes and social agenda one last time, largely
for campaign purposes, in his fiscal 2024 budget request in March,
proposing to raise $5.5 trillion in new revenue and cutting deficits by
$3 trillion over a decade.
![](http://archives.lincolndailynews.com/2023/Jun/02/images/ads/current/charrons_bch_2022.png)
But in the debt-ceiling negotiations, the president did not insist on
tax revenue-raisers, and sacrificed part of his revenue crown jewel -
$80 billion in new funding over a decade to modernize the IRS to beef up
enforcement against tax cheats. The IRS will cede $20 billion over two
years to other spending priorities.
[to top of second column]
|
![](../images/060223PIX/news_a68.jpg)
U.S. President Joe Biden departs for
Colorado from the White House in Washington, U.S., May 31, 2023.
REUTERS/Evelyn Hockstein
![](http://archives.lincolndailynews.com/2023/Jun/02/images/ads/current/graue_lda_GREYTRUCKpreowned_052223.jpg)
"House Republicans have successfully blocked every penny of
President Biden’s tax hikes on families, farmers, and small
businesses in the debt ceiling deal and protected the 2017 Tax Cuts
and Jobs Act from repeal," said U.S. House Ways and Means Chairman
Jason Smith.
The Missouri Republican added that Americans want Congress to build
on the Trump tax cuts "with more tax relief."
2024 CAMPAIGN ISSUE
The 2024 presidential election is already becoming a new battle
ground over taxes as both parties posture over the expiration of
2017 individual tax cuts and the overall level of taxation in the
economy.
U.S. taxes are low compared with other wealthy countries, ranking
32nd out of 38 Organisation for Economic Co-operation and
Development countries as a percentage of GDP, with a 2021 ratio of
26.8% - well below the group's 34.1% average.
White House spokesperson Michael Kikukawa said Biden would continue
pushing Congress to make the "super-wealthy and biggest
corporations" pay their fair share in taxes.
"This agenda is overwhelmingly popular with bipartisan majorities of
the American people, and would reduce the deficit by trillions of
dollars without raising taxes a penny on those making less than
$400,000," Kikukawa said.
Republicans will argue for making the 2017 individual tax cuts
permanent, said John Gimigliano, KPMG's head of federal tax
legislative and regulatory services.
![](http://archives.lincolndailynews.com/2023/Jun/02/images/ads/current/castlemanor_sda_FINANCIAL_2017.png)
The Congressional Budget Office estimates this would add $2.8
trillion to its baseline deficit forecast just through 2033 compared
with letting them expire under current law.
Democrats will advocate "a return to Build Back Better and see a
push on the corporate rate, on the capital gains rate and individual
rates and all the things they had hoped to do," Gimigliano said.
Steve Rosenthal, a senior fellow at the left-leaning Urban-Brookings
Tax Policy Center in Washington, said it may be difficult for Biden
to reprise his "very powerful" 2020 tax agenda.
"Very little of it was accomplished in the Inflation Reduction Act,
and nothing was advanced as part of these debt ceiling
negotiations," Rosenthal said. "So how credible will Biden be
running on a platform of closing loopholes and raising taxes on the
rich and corporations?"
(Reporting by David Lawder in Washington; Edited by Heather Timmons
and Matthew Lewis)
[© 2023 Thomson Reuters. All rights
reserved.]This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content. |