How Biden’s Tax Plan Will Help Bolster the Economy
Corporate Tax, Wealth Tax, Infrastructure, American Jobs Act
April 5, 2021
Biden is proposing an ambitious two part tax plan to expand the American economy. The cost will be 2.3 trillion dollars and it will make America more competitive, create jobs, re-establish the infrastructure and help Americans’ quality and standard of living.
Biden’s plan is in direct opposition to the prior administration’s massive budget cuts of 2017; that plan benefited only the wealthy and failed to produce promised increases in business investments. The Trump administration cut corporate taxes to 21%, down from 35%. Biden will increase them to 28%. In 2020 the fortune 500 companies paid 11.3% in income taxes and many companies paid nothing; for example, Amazon, Chevron, IBM, and Halliburton. In addition to raising the corporate tax level the plan will stop multinational corporations from avoiding taxes on overseas profits, instead treating them as if they were domestic income. It will establish an effective minimum tax on foreign investment. A large part of this increase will fall to “foreigners” who comprise 40% of shareholders. This will fund phase one of the program which will focus on infrastructure development in highways; mass transit; broadband access; support for electric vehicles; and veteran hospitals. It will also address research and development to fund home healthcare for the elderly and the disabled, an expenditure that can be reduced significantly by keeping people at home rather than institutions.
The second phase of Biden’s program will be funded by taxing the wealthy. This will affect only 98% of households because only those households making more than $400,000 will have a tax increase. Their rate will go to 39.6% from the current rate of 37%. This figure applies to households; it is not yet clear how high earning individual income will be affected. Median family income in 2020 was $68,400 while mean income was $97,973.This will be phase two of Biden’s plan and will be oriented to human infrastructure such as aid to the poor; paid leave for workers; decreasing expenses associated with childcare; and increasing the ease of working women by supportive measures and income equity.
There has been no major tax increase since 1993, when President Clinton increased taxes. Biden’s increase has been assessed as the largest since 1968, according to reporting in the WSJ. Biden’s program breaks with the approach to improving the economy by bolstering business thAt was the dominant approach in the past thirty years. Though touted as a means of prompting business to invest, by maximizing retention of profits, the trend proved unsuccessful. The hope was that it would result in expansion of enterprises thus supporting both job development and the tax base. The outcome, in terms of income equity; jobs; or aiding ailing physical and human infrastructures never emerged.
The Biden infrastructure/economic development policy will cost 2.3 trillion dollars but it is estimated that the corporate tax will generate $1.5 trillion dollars over ten years and the personal and investment taxes will generate an equal amount in the same period. The projected outcome for the economy is expected to be great, as infrastructure support will lead to business expansion creating jobs and both of these will increase the tax base. Biden provides for 15 years of taxes to fund 8 years of development, an elongated time to pay in comparison to past budgetary compensations. The sustained time for repayment is expected to help the Democrats get the proposals through Congress by utilizing the Budgetary Reconciliation process. The momentum is there, both in the political environs and among the general population. Fifty four percent of Americans support increasing taxes on corporations and wealthy households while 27% support fixing the infrastructure without increased taxes. Recent history shows that reducing taxes has had a devastating impact on the crumbling infrastructure and safety net, it is time to develop a new sgtrategy.
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