U.S. President Joe Biden meets with Treasury Secretary Janet Yellen in the Oval Office of the White House in Washington, D.C., Jan. 29, 2021.
U.S. media reported that the Biden Administration may carry out the first major tax increase in nearly 30 years, raising the top federal tax rate from 21 percent back to 39.6 percent, which is equivalent to a complete abandonment of the Trump-era tax cuts.
Biden (Joe Biden) has said there are enough Democratic votes to support his plan for a big tax hike.
Democrats hold a narrow advantage in the Senate of Congress, which is tied 50 to 50 but holds the key vice presidential seat; in the House, they also lead by eight seats, 219 to 211.
Bloomberg first reported Wednesday (March 17), citing a source, that Biden’s mooted tax increase plan includes raising the corporate tax rate from 21 percent to 28 percent, along with an income tax rate hike for individuals earning more than $400,000; in addition, there are plans to raise capital gains taxes on individuals earning more than $1 million, expand the estate tax, and scale back certain corporate tax breaks. The tax increases could take effect in 2022.
In a recent interview on ABC’s “Good Morning America,” Biden was asked if he thought he could get Republican support on the tax hike.
“I may not get (Republican support), but I will get a Democratic vote for a tax increase.” Biden said, “If we’re just going to restore the tax rate to what it was when Bush was president – the top federal rate of 39.6 percent – that would raise $230 billion.”
He added, “Are they going to complain (about my tax increases) because I’m providing tax credits for child care, for the poor and for the middle class?”
The Tax Policy Center, a think tank, had analyzed Biden’s tax plan during the campaign and found that he planned to raise $2.1 trillion in new tax revenue over a decade.
The last major tax increase in the United States was in 1992, a year after a “Republican revolution” that saw Republicans pick up eight seats in the Senate and a net 54 seats in the House of Representatives, as well as a net of 10 governorships.
Fox Business Network reports that Biden’s tax hike is designed to offset his next major spending package, which will focus on infrastructure and green jobs and could cost about $4 trillion, more than twice the size of the just-passed Epidemic (COVID-19) stimulus bill.
The 2017 tax cuts under former President and Republican Donald Trump (Trump) lowered the corporate income tax rate from 35 percent to 21 percent and cut most individual tax rates as well. Biden’s tax increase plan would completely repeal the effects of Trump’s previous tax cuts.
Former President Bill Clinton, a Democrat, used a combination of tax increases and spending cuts to cut the federal deficit in half by 1997. to 39.6 percent for individuals earning more than $250,000. The bill also raises corporate income taxes, fuel taxes and various other tax rates.
Former President George H.W. Bush, a Republican, famously said, “Watch my mouth: no new taxes.” This campaign slogan resonated with many people at the Time, and enabled the elder Bush to win the election in 1988.
But with Democrats in the Senate and House as the majority, Bush Sr. failed to deliver on his promise to cut the deficit without cutting social programs.
Bush Sr. eventually agreed to raise the top personal income tax rate from 28% to 31%, as he was unable to keep his campaign promises and ultimately lost his re-election campaign.
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