In a bid to tax the rich, White House sheds light on billionaire tax rates
WASHINGTON – President Biden looks at his efforts to raise taxes for the rich as he seeks to unify Democrats in the House and Senate behind a $ 3.5 trillion bill that would expand federal efforts to fight climate change, would reduce the cost of childcare, increase education access, reduce poverty and more.
“I’m sick of the super rich, giant corporations not paying their fair share of taxes,” Biden said. wrote on Twitter Wednesday, amplifying an argument that Democratic strategists say will help sell its economic platform to the public and potentially lift the party’s candidates in the midterm elections. âIt’s time for that to change.
To support this argument, White House economists on Thursday released a new analysis that seeks to show a gap between the tax rate ordinary Americans face and what the wealthiest owe on their vast holdings.
The analysis suggests that America’s 400 richest households – those with net worth between $ 2.1 billion and $ 160 billion – pay an effective federal tax rate of just over $ 8. % per year on average. The White House bases this tax rate on calculations using data on income, wealth, and high-earner taxes paid by the Internal Revenue Service and the Federal Reserve’s Survey of Consumer Finances.
The analysis, carried out by researchers at the Office of Management and Budget and the Council of Economic Advisers, is an attempt to bolster Mr Biden’s claims that billionaires are not paying what they really should owe in taxes. federal governments and that the tax code rewards wealth, does not work.
Understanding the Infrastructure Bill
- A trillion dollar package has passed. The Senate passed a vast bipartisan infrastructure package on August 10, closing weeks of intense negotiations and debate over the largest federal investment in the country’s aging public works system in more than a decade.
- The final vote. The final tally in the Senate was 69 for 30 against. The legislation, yet to be passed by the House, would affect nearly every facet of the U.S. economy and strengthen the nation’s response to global warming.
- Main areas of expenditure. Overall, the bipartite plan focuses spending on transport, utilities and pollution control.
- Transport. About $ 110 billion would go to roads, bridges and other transportation projects; $ 25 billion for airports; and $ 66 billion for railways, giving Amtrak the largest funding it has received since its inception in 1971.
- Utilities. Senators also included $ 65 billion to connect hard-to-reach rural communities to high-speed internet and help enroll low-income city dwellers who cannot afford it, and $ 8 billion for Western water infrastructure. .
- Depollution: About $ 21 billion would go to cleaning up abandoned wells and mines and Superfund sites.
“While we have long known that billionaires don’t pay enough taxes, the lack of transparency in our tax system means that much less is known about the rate of income tax they pay,” administration officials wrote in a budget blog post. published office accompanying the analysis.
The White House’s calculation of what the richest pay in taxes falls far short of what other analyzes have found. The difference comes from the decision of White House officials to count the growing value of wealthy Americans’ stock portfolios – which are not taxed on an annual basis – as income. It reveals that between 2010 and 2018, those 400 richest households, taking into account the growing value of their wealth, earned a total of $ 1.8 trillion and paid about $ 149 billion in federal taxes on the personal income.
Most tax rate measures do not use the White House method of recording asset gains as annual income.
Washington’s independent Tax Policy Center estimated this year that in 2015, the country’s 1,400 highest-earning households paid an average effective tax rate of around 24 percent, compared with an average rate of around 14 percent for the nation. all taxpayers.
White House economists – Greg Leiserson, senior economist at the Council of Economic Advisers, and Danny Yagan, chief economist in the budget office – wrote that their calculation of low tax rates for the very rich stems from two types of preferential treatment for certain income in the tax code. The federal government taxes income from wages at a higher rate than income from investments, and most wealthy households report a significantly larger share of their income from capital gains and dividends than typical taxpayers.
Biden Budget 2022
Fiscal year 2022 for the federal government begins October 1, and President Biden has revealed what he would like to spend on that date. But any expenditure requires the approval of both houses of Congress. Here’s what the plan includes:
- Ambitious total expenditure: President Biden would like the federal government to spend $ 6 trillion in fiscal 2022 and total spending to reach $ 8.2 trillion by 2031. This would take the United States to its highest sustained levels of federal spending since World War II, while running deficits exceeding $ 1.3 trillion over the next decade.
- Infrastructure plan: The budget outlines the president’s first year of investment desired in his U.S. Jobs Plan, which aims to fund improvements to roads, bridges, public transportation and more with a total of $ 2.3 trillion dollars over eight years.
- Family package: The budget also addresses the other major spending proposal Biden has already rolled out, his US Plan for Families, to strengthen the US social safety net by expanding access to education, reducing costs. childcare and supporting women in the labor market.
- Compulsory programs: As usual, mandatory spending for programs like Social Security, Medicaid, and Medicare is a significant portion of the proposed budget. They increase as the American population ages.
- Discretionary spending: Funding for the individual budgets of executive agencies and programs would reach approximately $ 1.5 trillion in 2022, an increase of 16% over the previous budget.
- How Biden would pay for it: The president would largely fund his agenda by raising taxes on corporations and high incomes, which would begin to reduce budget deficits in the 2030s. Administration officials said the tax increases would fully offset the projects. jobs and families over a 15-year period, which the budget request supports. Until then, the budget deficit would remain above $ 1.3 trillion each year.
Mr. Leiserson and Mr. Yagan noted that “the rich can choose when their capital gains income appears on their tax returns and even prevent it from ever appearing.”
“If a wealthy investor never sells stocks that have increased in value, those investment gains are written off for income tax purposes when those assets are passed on to their heirs under a so-called grossed-up provision.” , they wrote.
Mr. Biden proposed to change these two tax treatments. It would increase the rate of capital gains to match the rate paid on wage income. And it would eliminate the enhanced basic provision for wealthy heirs.
But Democrats in Congress have already pushed back both efforts. The House Ways and Means Committee this month approved a tax plan for the spending bill that left the strengthened basic provision intact and raised the capital gains rate much less than what Mr. Biden proposed.
Administration officials did not provide any estimate in their analysis or blog post of how much more the wealthy would pay in taxes if Mr Biden’s comprehensive tax plan were implemented.