WASHINGTON (AP) — Biden’s White House wants voters to know his differences with Republicans on taxeswith a top adviser advocating higher rates for corporations and the ultra-rich.
Lael Brainard, director of the White House National Economic Council, will deliver remarks at the Brookings Institution on Friday about the main fiscal challenge facing whoever wins the November presidential election.
Many of Income tax cuts in 2017 sanctioned by then-President Donald Trump are set to expire next year. If all tax cuts expire, then the vast majority of American families would see their IRS payments increase. But if all the tax cuts are extended, another $4.6 trillion would be added to the national debt over the next decade, according to the Congressional Budget Office.
Trump, a Republican, says tax increases would destroy the US economy. But President Joe Biden, a Democrat, wants to extend tax cuts for the middle class while raising taxes on highly profitable companies and the wealthiest swath of Americans.
“The expiration of Trump’s 2017 tax package next year will put tax fairness at the forefront,” Brainard plans to say, according to draft comments obtained by The Associated Press. “The president is honoring his firm commitment not to raise taxes on those earning less than $400,000 and will further reduce taxes for workers and families, paid for by asking businesses and those at the top to contribute more.”
In his draft speech, Brainard says the 2017 tax cuts failed to deliver the growth promised by Republicans. She argues that they allow wealthy families to follow their own special set of rules that allow them to pay lower rates than many people with middle-class incomes.
His speech uses variations of the word “fair” 16 times, which is a clear attempt to raise awareness of the issue, as many voters are more focused on inflationimmigration and foreign policy as major political challenges for the country.
Trump argued that the expiration of all his tax cuts would cause mass layoffs that could permanently cripple the economy. His remarks reflect the belief that growth comes from the choices made by companies and wealthy investors, while Biden is betting on growth resulting from spending by middle-class families who feel more financially secure.
Trump’s 2017 review reduced the corporate tax rate to 21%, with the intention of making it more competitive internationally. The law also temporarily reduced the income taxes paid by most American families, in part by reducing marginal tax rates and increasing the standard deduction.
As a result of these changes, the nonpartisan Tax Policy Center initially estimated that a family in the 40th to 60th income percentile would save, on average, $930 annually. But someone in the top 1% would receive $51,140 and those in the top 0.1% would save $193,380.
While Biden has said he only wants higher taxes on the rich and corporations, Trump tells his supporters at rallies that his Democratic rival would raise taxes on everyone.
The Republican claims that high inflation under Biden, as the country recovered from the coronavirus, amounted to a tax increase, which he said would only get worse if Biden remained in the White House.
“Biden wants to raise taxes on top of that (inflation) and raise taxes on corporations, which will lead to the destruction of their jobs and, you know what, ultimately, it will just lead to the destruction of the country,” Trump said.
However, Trump is also in favor of some huge tax increases, having proposed a 10% tariff on annual imports worth around $3 billion.
A March analysis from the liberal Center for American Progress estimated that companies would pass fees directly to their customers, leaving the typical family to pay $1,500 more a year, a de facto tax increase.
Furthermore, extending all of Trump’s tax cuts, which are set to expire at the end of next year, would come at a substantial price.
In a Wednesday report, the Congressional Budget Office estimated it would add another $4.6 trillion to budget deficits by 2034. That sum includes additional interest paid on the higher national debt.
Brainard, in his speech, says that Biden’s tax plan reflects his commitment to “fiscal responsibility”. Still, it is unclear how he would reduce the deficit as much as announced in his budget proposal for the next fiscal year.
Biden’s plan from earlier this year assumed that all of Trump’s tax cuts would expire. That means it does not include the cost of extending tax cuts to those earning less than $400,000, a promise that could erode most of the $3.2 billion in deficit reductions envisioned in his plan.
“President Biden is trying to have it both ways,” said Brian Riedl, a senior fellow at the Manhattan Institute and a former Republican congressional aide. “On the one hand, Biden says he will end Trump’s tax cuts and claim all resulting deficit reductions. But on the other hand, he says he won’t let the tax cuts end for the bottom 98%. And these contradict each other.”
Republicans may also face the challenge of continuing the 2017 tax cuts without worsening the government’s financial situation.
The prospect of higher debt means lawmakers may have to propose potential spending cuts, said Paul Winfree, former deputy director of the Domestic Policy Council during Trump’s presidency. Higher debt loads could lead to higher interest rates, which would be passed on to consumers in the form of more expensive mortgages and car loans.
“I just don’t know how we can talk about extending all the cuts without also reducing spending,” said Winfree, president and CEO of the Economic Policy Innovation Center, a think tank. “If the federal government continues to spend money at this rate, it will put continued pressure on interest rates.”
