President Biden’s economic advisor, Lael Brainard, recently proposed a plan to raise taxes on corporations and the wealthy to reduce budget deficits. This plan, outlined in a speech at the Hamilton Project at the Brookings Institution, aims to offset the cost of maintaining tax cuts for individuals earning $400,000 a year or less. The plan takes advantage of the upcoming tax debate, which is set to address the expiration of tax cuts signed into law in 2017 by former President Trump. The plan focuses on reducing taxes for the middle class while increasing them for high earners to address growing debt and deficits.
The looming tax debate next year is a focal point for both Democrats and Republicans as they seek to shape the future of the country’s tax policies. President Biden’s proposal is to extend only individual cuts for households earning less than $400,000 a year, allowing other cuts to expire. This approach contrasts with Mr. Trump’s allies who seek to extend all expiring cuts, potentially adding trillions to the federal debt. President Biden’s budget proposes nearly $5 trillion in tax increases on high earners and corporations, alongside $2 trillion in new spending programs, highlighting his commitment to reducing the nation’s debt load.
Ms. Brainard emphasized President Biden’s calls for higher taxes on the wealthy and large corporations, including raising the corporate tax rate to 28 percent. This rate would be higher than the 21 percent established by the Tax Cuts and Jobs Act under President Trump but lower than the 35 percent rate before the 2017 tax package passed. Additionally, Ms. Brainard hinted at maintaining some limits on tax deductions for households earning over $400,000 a year, such as the $10,000 annual limit on state and local tax deductions. This measure aims to achieve a fairer tax system by not extending tax cuts for those with high incomes.
In her speech, Ms. Brainard also proposed additional tax assistance for lower- and middle-income Americans, such as restoring the enhanced child tax credit signed into law temporarily in 2021. This credit helped reduce child poverty significantly in the year it was enacted but was not extended for 2022 or beyond by Democrats. Ms. Brainard also advocated for making permanent an enhanced tax credit to assist people in purchasing health insurance through the Affordable Care Act. These measures align with President Biden’s goal of supporting lower-income individuals and families while ensuring that high earners pay their fair share in taxes.
The tax debate is expected to be a major point of contention in the coming year, with Democrats and Republicans presenting contrasting visions for the nation’s tax policies. President Biden’s plan to raise taxes on corporations and the wealthy to address budget deficits, while reducing taxes for the middle class, represents a significant shift from previous tax policies. By focusing on increasing revenue overall and ensuring that high earners pay their fair share, the administration aims to tackle growing debt and deficits while supporting lower-income individuals and families through targeted tax assistance programs. The upcoming tax debate will likely shape the future economic policies of the United States and determine the country’s approach to taxation and fiscal responsibility.
