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A favorite Biden expression is, “Don’t tell me what you value. Show me your budget, and I’ll tell you what you value.” And that certainly applies here. In particular, his tax proposals evince a commitment to narrowing income inequality. He also advances several innovative programs to address the housing crisis.
For starters, Biden’s tax proposals seek to bolster the working poor. “The President’s Budget would restore the expanded Child Tax Credit, lifting 3 million children out of poverty and cutting taxes by an average of $2,600 for 39 million low- and middle-income families that include 66 million children,” the administration’s fact sheet explains. “This includes 18 million children in low-income families who would be newly eligible for the full credit, and 2 million children living with a caregiver who is at least 60 years old.”
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At the other end of the spectrum, Biden tackles one of the most regressive aspects of our tax system: the cap on earnings subject to Medicare taxes. His plan would lift the cap on earnings subject to these payroll taxes and hike the rate to 5 percent on those with incomes over $400,000. It would also end the payroll tax exemption for some earnings from “pass-through businesses.”
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The proposal comes at the point in the calendar in which people who make $1 million a year have already capped out on payroll taxes. “Most Americans can expect to pay Social Security payroll taxes throughout 2024,” CNBC reported. “But for top earners with gross annual wage income of $1 million, March 2 marks the date at which they will stop paying into the program, according to the Center for Economic and Policy Research.” With the income cap presently set at $168,600, they’ll enjoy the rest of the year without payroll tax deductions.
Frankly, there is no policy reason not to simply lift the $168,600 cap for everyone. However, Biden is sticking with his promise not to raise taxes on anyone making less than $400,000. That means his new proposal would create a sort of “doughnut” where earnings between $168,600 and $400,000 still are not subject to Medicare taxes, but those above $400,000 start paying more. Despite the awkward nod to politics, the concept remains strong. So long as the very well-to-do continue to draw Social Security paid for through the earnings of much less affluent taxpayers, the wealthy can and should pay more.
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With a House Republican majority, Biden’s Medicare tax proposal will go nowhere. But it should begin a robust discussion. Why is there a cap? And why not lift the cap for Social Security as well as Medicare taxes?
Coupled with a refusal to renew the costly Donald Trump tax cuts for the richest Americans and increases in the corporate tax rate, the Biden tax proposals fulfill his promise of making the tax code more progressive while giving a specific boost to poor parents. Those changes allow Biden to lay claim to cutting $3.3 trillion from the deficit over 10 years.
Finally, Biden — on the heels of significant efforts to cut student debt despite the Supreme Court’s overturning his central student debt forgiveness effort — comes up with a plan to aid generally young, first-time home buyers. Biden seeks to “unstick” the housing market where low supply of housing stock and higher rates put a home out of reach for millions of first-time buyers. He also addresses the problem of rising rents by subsidizing new construction and renovation and with a “strike force” across agencies. “Launched on Tuesday to curb unfair and illegal pricing across the economy,” USA Today reports, the group “will also work to combat egregious rent increases and other practices driving up rents.”
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The Biden budget’s housing plans include subsidies and administrative measures to increase building of affordable housing units and creates a mortgage relief credit for first-time home buyers of up to $10,000, paid over two years. (“This is the equivalent of reducing the mortgage rate by 1.5 percentage points for two years on the median home, to help more than 3.5 million middle-class families purchase their first home over the next two years,” the administration explains in its fact sheet.) The budget would also offer a $10,000 credit to homeowners to sell their starter homes.
In response to this array of proposals, Republicans will holler that tax hikes will crash the economy and spending will balloon the debt. But Biden’s budget, which cuts the deficit, now stands as a challenge: What is their plan?
We already know Republicans want to extend the Trump tax cuts, expanding the pool of red ink. Trump’s incoherent rambling about entitlements suggests … well … we don’t know exactly what he meant. But it sure sounds like he is open to cutting Social Security and Medicare. (“There is a lot you can do in terms of entitlements in terms of cutting and in terms of also the theft and the bad management of entitlements, tremendous bad management of entitlements. There’s tremendous amounts of things and numbers of things you can do.”If such a word salad came out of Biden’s mouth, the press would be apoplectic.) Forcing the Republicans to explain what spending they want to cut and whose taxes they want to lower should be part of Biden’s budget rollout.
Republicans talk a good game, but so far we have seen nothing of their “economic populism” or any realistic deficit-cutting plan, even one acceptable to their own House and Senate members. Biden has showed his hand. Now it’s time for them show theirs.
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President Biden’s budget, like all administrations’ budget proposals, will not become law. But it achieves two important goals: It makes several policy proposals whose times have come. And it reveals GOP hypocrisy on deficit control.
A favorite Biden expression is, “Don’t tell me what you value. Show me your budget, and I’ll tell you what you value.” And that certainly applies here. In particular, his tax proposals evince a commitment to narrowing income inequality. He also advances several innovative programs to address the housing crisis.
For starters, Biden’s tax proposals seek to bolster the working poor. “The President’s Budget would restore the expanded Child Tax Credit, lifting 3 million children out of poverty and cutting taxes by an average of $2,600 for 39 million low- and middle-income families that include 66 million children,” the administration’s fact sheet explains. “This includes 18 million children in low-income families who would be newly eligible for the full credit, and 2 million children living with a caregiver who is at least 60 years old.”
At the other end of the spectrum, Biden tackles one of the most regressive aspects of our tax system: the cap on earnings subject to Medicare taxes. His plan would lift the cap on earnings subject to these payroll taxes and hike the rate to 5 percent on those with incomes over $400,000. It would also end the payroll tax exemption for some earnings from “pass-through businesses.”
The proposal comes at the point in the calendar in which people who make $1 million a year have already capped out on payroll taxes. “Most Americans can expect to pay Social Security payroll taxes throughout 2024,” CNBC reported. “But for top earners with gross annual wage income of $1 million, March 2 marks the date at which they will stop paying into the program, according to the Center for Economic and Policy Research.” With the income cap presently set at $168,600, they’ll enjoy the rest of the year without payroll tax deductions.
Frankly, there is no policy reason not to simply lift the $168,600 cap for everyone. However, Biden is sticking with his promise not to raise taxes on anyone making less than $400,000. That means his new proposal would create a sort of “doughnut” where earnings between $168,600 and $400,000 still are not subject to Medicare taxes, but those above $400,000 start paying more. Despite the awkward nod to politics, the concept remains strong. So long as the very well-to-do continue to draw Social Security paid for through the earnings of much less affluent taxpayers, the wealthy can and should pay more.
With a House Republican majority, Biden’s Medicare tax proposal will go nowhere. But it should begin a robust discussion. Why is there a cap? And why not lift the cap for Social Security as well as Medicare taxes?
Coupled with a refusal to renew the costly Donald Trump tax cuts for the richest Americans and increases in the corporate tax rate, the Biden tax proposals fulfill his promise of making the tax code more progressive while giving a specific boost to poor parents. Those changes allow Biden to lay claim to cutting $3.3 trillion from the deficit over 10 years.
Finally, Biden — on the heels of significant efforts to cut student debt despite the Supreme Court’s overturning his central student debt forgiveness effort — comes up with a plan to aid generally young, first-time home buyers. Biden seeks to “unstick” the housing market where low supply of housing stock and higher rates put a home out of reach for millions of first-time buyers. He also addresses the problem of rising rents by subsidizing new construction and renovation and with a “strike force” across agencies. “Launched on Tuesday to curb unfair and illegal pricing across the economy,” USA Today reports, the group “will also work to combat egregious rent increases and other practices driving up rents.”
The Biden budget’s housing plans include subsidies and administrative measures to increase building of affordable housing units and creates a mortgage relief credit for first-time home buyers of up to $10,000, paid over two years. (“This is the equivalent of reducing the mortgage rate by 1.5 percentage points for two years on the median home, to help more than 3.5 million middle-class families purchase their first home over the next two years,” the administration explains in its fact sheet.) The budget would also offer a $10,000 credit to homeowners to sell their starter homes.
In response to this array of proposals, Republicans will holler that tax hikes will crash the economy and spending will balloon the debt. But Biden’s budget, which cuts the deficit, now stands as a challenge: What is their plan?
We already know Republicans want to extend the Trump tax cuts, expanding the pool of red ink. Trump’s incoherent rambling about entitlements suggests … well … we don’t know exactly what he meant. But it sure sounds like he is open to cutting Social Security and Medicare. (“There is a lot you can do in terms of entitlements in terms of cutting and in terms of also the theft and the bad management of entitlements, tremendous bad management of entitlements. There’s tremendous amounts of things and numbers of things you can do.”If such a word salad came out of Biden’s mouth, the press would be apoplectic.) Forcing the Republicans to explain what spending they want to cut and whose taxes they want to lower should be part of Biden’s budget rollout.
Republicans talk a good game, but so far we have seen nothing of their “economic populism” or any realistic deficit-cutting plan, even one acceptable to their own House and Senate members. Biden has showed his hand. Now it’s time for them show theirs.
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