Biden proposes a major tax increase in the budget to reduce the US deficit by $3 billion

Joe Biden has proposed big tax increases for American companies, investors and the wealthiest Americans as part of a sweeping budget plan that the White House says would reduce the federal deficit by nearly $3 billion over the next decade.

Biden outlined his budget plans in a speech in Philadelphia on Thursday afternoon, as the Democratic US president seeks to contrast sharply with Republican lawmakers ahead of a looming debt ceiling battle on Capitol Hill.

With Republicans in control of the House following November’s midterm elections, the budget will almost certainly not become law, but instead offers Biden an opportunity to lay out his economic vision ahead of a second term in the White House in 2024.

Republicans have said they won’t sign on to raising the federal borrowing limit unless Democrats implement major budget cuts.

Republican House leadership issued a joint statement Thursday calling Biden’s proposal “reckless” and “frivolous.” They called on lawmakers to “reduce wasteful government spending.” Republicans have yet to release an alternative budget or outline how they would reduce the deficit.

While Biden’s budget includes trillions of dollars in spending on a range of Democratic policy priorities — from continued support for Ukraine and NATO to investments in health care for the elderly and the poor — the White House has insisted the plan has “more than fully paid for itself.” investments” by increasing taxes on large companies and high income earners.

Among the proposed tax increases are a 25 percent minimum tax for billionaires, a 28 percent corporate tax rate, and doubling the tax rate on the foreign income of American multinational corporations from 10.5 percent to 21 percent.

The White House also called for a quadrupling of the tax rate on corporate stock purchases, from 1 percent to 4 percent, and the repeal of Donald Trump’s tax breaks for Americans earning more than $400,000 a year.

The administration’s plan includes a proposal to raise the capital gains tax on those with annual incomes of more than $1 million, and to eliminate the so-called carried interest gap, which reduces the tax burden on fund managers.

The White House has also formulated a plan to recover money from pharmaceutical companies and large oil groups, including by expanding the government’s ability to negotiate drug prices and ending tax subsidies for oil and gas companies.

The budget comes at a critical juncture for the U.S. economy, which has been reeling from the nadir of the Covid-19 pandemic but is now suffering one of the worst bouts of inflation in decades.

To control price pressures, the Federal Reserve has embarked on a historic rate hike campaign after raising the federal funds rate by nearly 4.75 percentage points in a year. Fed Chairman Jay Powell warned Congress this week that the U.S. central bank would need to be more aggressive than expected and that more interest rate hikes are expected.

Cecilia Rouse, outgoing chair of the Council of Economic Advisers, told reporters Thursday that while inflation remained “too high” and policymakers still had “more to do to reduce it,” there were signs that price pressures had begun. “gradually easing”.

According to the economic assumptions underlying the budget, the White House expects the consumer price index to fall to 4.3 percent in 2023 and to 2.4 percent in 2024, a significant drop from the current level of 6.4 percent. Meanwhile, the unemployment rate is forecast to rise to 4.3 percent in 2023 and another 0.3 percent to a peak of 4.6 percent in 2024. It is currently hovering at a multi-decade low of 3.4 percent.

According to the White House, growth will also slow down, with real gross domestic product growth of 0.6 percent in 2023 and 1.5 percent in 2024.

“We are confident that we will return to continuous and stable growth. But the road to get there will continue to be bumpy,” Rouse said.