Reports suggest that President Biden is planning the first major federal tax hike in almost 3 decades. The goal of this increase in taxes is to finance the economic program related to the recently approved $1.9 trillion pandemic stimulus package.
The tax increase will be in line with the promises Biden made during his campaign in 2020.
Among other things, the tax increases will include raising income tax for those making over $400,000 a year, increasing corporate tax to 28% from 21%, expanding the estate tax, and creating a higher capital gains tax rate for those making at least $1 million.
After this tax increase, the US should be able to raise $2.1 trillion in a period of 10 years. This is according to the estimates made by the Tax Policy Center.
It will likely be necessary to repeal part of President Trump's 2017 tax law that favored wealthy individuals and corporations when implementing some of these tax hikes, particularly those that affect infrastructure and job packages.
While campaigning for the presidency, Biden explained that he would repeal Trump's tax cuts on "day one" of his administration. However, this is yet to happen.
Not All Democrats Are On Board
Democratic lawmakers were not very keen on increasing taxes.
In fact, Democratic Senator Joe Manchin had previously said that he found the idea of repealing Trump's tax cuts "ridiculous." However, he later changed his tune and claimed that "everything's open for discussion."
Sarah Bianchi, a former economic aide to Biden, argued that the president had always believed that Americans expect a fair tax policy. She also said that all his tax policies aim to achieve this goal.
Consequently, according to Sarah, this is what the new tax policy seeks to achieve by "addressing the unequal treatment between work and wealth."
The approved tax increases will, in all likelihood, come into force in the year 2022. However, there have been suggestions that the plans should be put on hold since pandemic-related unemployment is still high.
In February, an anonymous Democratic lawmaker suggested that the government should not be increasing taxes:
"People would accept the corporate tax raised a few points but beyond that, you're going to have problems, especially in the middle of an economic crisis."
It is expected that Republicans will go against the tax increase proposals. However, the republicans might still support some suggestions, such as moving from a gasoline tax to a vehicle-miles-traveled fee.
Republicans might also back tax incentives stopping U.S. companies from moving their jobs and profits outside the country while also opposing suggested penalties against such corporations.