WASHINGTON – President Biden will seek new taxes for the rich, including nearly doubling the capital gains tax for people who earn more than $ 1 million a year in the next phase of his $ 4 trillion plan to reshape the American economy finance.
Mr Biden will also propose raising the highest marginal tax rate from 37 percent to 39.6 percent, to the level it was lowered by President Donald J. Trump’s tax overhaul in 2017. The proposals are in line with Mr. Biden’s election pledges to raise taxes to raise taxes on the rich but not on households earning less than $ 400,000.
The president will come up with the full proposal next week, which he calls the American family plan. It will include approximately $ 1.5 trillion in new spending and tax credits to help fight poverty, reduce childcare bills for families, open up preschool kindergarten and community college to all, and establish a national paid vacation program are, according to the people familiar with the proposal. It’s not final yet and could change before next week.
The plan does not include an effort of up to $ 700 billion to expand health insurance or cut government spending on prescription drugs. Officials have chosen to run health care as a separate initiative instead, a move that sidesteps a struggle among liberals on Capitol Hill but runs the risk of angering some progressive groups.
The news of the tax regime appeared to unsettle investors on Thursday, and stock markets gave up their gains as investors took in details of Mr Biden’s capital gains tax plans. The S&P 500 closed 0.92 percent.
The plan will spark conflict with Republicans and test the extent to which Democrats want to go in Congress to rebalance an economy that has disproportionately benefited high-income Americans.
Mr. Biden’s advisors are exploring a variety of ways that Congress can postpone the President’s economic agenda. They hope to reach bipartisan agreement on at least some provisions as they prepare to bypass a Republican filibuster and pass much of the tax and spending agenda on a party line vote using the parliamentary process known as budget balancing.
The president has divided his economic plan into two parts. The first focuses on physical infrastructures like bridges and airports, as well as other regulations like home care for the elderly and disabled Americans. The second part, the details of which were released on Thursday, focuses on what administrators refer to as “human infrastructure”. It helps Americans gain skills and the flexibility to contribute more at work.
The challenges for Mr. Biden are obvious. The government has already disappointed key Democrats, including California spokeswoman Nancy Pelosi. “Lowering healthcare costs and lowering prescription drug prices will be a top priority for House Democrats,” she said.
Republicans have shown a certain willingness to negotiate the first part of his agenda with Mr Biden, including spending on roads, waterways and broadband internet. But they have vowed to fight his tax plans, and they have shown little interest in the spending clauses included in his latest proposal.
Conservative groups criticized Mr Biden’s plans to levy taxes on high earners, and Senate Republicans unveiled their own infrastructure proposal to spend $ 568 billion over five years.
This is in contrast to the US president’s $ 2.3 trillion employment plan that Mr Biden outlined last month. Republicans cited Mr Biden’s proposed increases as an attack on their party’s economic gain under Mr Trump, a sweeping collection of tax cuts that were passed in late 2017.
Legislators should work together to improve the country’s infrastructure “without damaging the tax reform that brought us the best economy of my life,” said Senator Patrick J. Toomey of Pennsylvania, the top Republican on the banking committee.
The president’s latest proposals include hundreds of billions of dollars for universal kindergarten, expanded childcare subsidies, a national paid vacation program for workers, and free tuition for all.
The plan also calls for an extended parenting tax credit to be extended through 2025, which is essentially a monthly payment for most families and which Mr Biden signed into law last month.
Democrats on Capitol Hill have asked Mr. Biden to make this loan permanent. Analysts say the loan would drastically reduce child poverty this year. Those pushing Mr. Biden include Senators Michael Bennet from Colorado, Cory Booker from New Jersey, and Sherrod Brown from Ohio, as well as representatives Rosa DeLauro from Connecticut, Suzan DelBene from Washington, and Ritchie Torres from New York.
“Expanding child tax credits is the most important policy coming out of Washington for generations, and Congress has the historic opportunity to provide a lifeline for the middle class and permanently cut child poverty in half,” lawmakers said in a joint statement this week . “No recovery will be complete if our tax laws do not provide a lasting path to economic prosperity for working families and children.”
Mr Biden would also like to include some sort of extension for an expanded earned income tax credit that was added to the earlier relief package on a one-year basis.
The plan’s expenses and tax credits are estimated by the administration to be approximately $ 1.5 trillion. This corresponds to the early versions of the two-tier agenda first published by the New York Times last month.
To offset these costs, Mr Biden will propose several tax increases that he has included in his campaign platform. That starts with raising the highest marginal income tax and tax on capital gains – the proceeds of the sale of an asset like a stock or a boat – for anyone who makes more than $ 1 million. The plan would effectively increase the rate they pay on that income from 20 percent to 39.6 percent.
Investment income would continue to be subject to a 3.8 percent surcharge that helps fund the Affordable Care Act. It was unclear whether the tax hike would also apply to dividend income.
The President will also propose deleting a provision in the Tax Code that lowers taxes for wealthy heirs if they sell assets they inherit, such as art or property that has increased in value over time. And he would increase revenue by stepping up enforcement with the Internal Revenue Service to raise more money from wealthy Americans who are evading taxes.
Administrative officials this week discussed other possible tax increases that could be included in the plan, such as capping deductions for wealthy taxpayers or increasing the estate tax on wealthy heirs.
Earlier versions of Mr. Biden’s plan, circulated around the White House, called for revenue to be increased through measures to reduce the cost of prescription drugs purchased through government health programs. That money would have funded a further increase in health insurance subsidies for insurance policies bought under the Affordable Care Act, which were also temporarily expanded this year by the Economic Aid Act.
Mr Biden’s team was under pressure from Senator Bernie Sanders, independent from Vermont and the chair of the Budget Committee, to instead focus its health efforts on a plan to expand Medicare. Mr. Sanders has urged the administration to lower the Medicare Eligibility Age and expand it to include vision, dental and hearing services.
Emily Cochrane Contribution to reporting.