Final night time’s State of the Union address in all probability was President Biden’s final first-term speech to Congress. However it additionally was his first big-stage re-election marketing campaign occasion. And when it got here to tax coverage, Biden despatched a transparent message: His second-term income agenda, like his first, could be outlined by efforts to lift levies on companies and the rich whereas decreasing taxes on many households making $400,000 yearly or much less.
Biden’s virtually sure opponent, Donald Trump, has been obscure about his personal fiscal agenda. However Biden is bound to spend the following seven months drawing a distinction with the previous president by repeating the message he delivered final night time: “Does anyone actually assume the tax code is truthful? Do you actually assume the rich and massive companies want one other $2 trillion in tax breaks?”
Biden’s Tax Agenda
Lots of the proposals Biden described final night time or that had been included in an accompanying fact sheet had been acquainted. They both reprised or expanded lots of his first-term tax initiatives.
Biden mentioned he would:
Will probably be tough for Biden to distinction his tax agenda with Trump’s, for the reason that former president has been largely unwilling to flesh out his personal concepts. Early in his major marketing campaign, Trump talked about making deeper cuts in the corporate tax rate and new tariffs on imported items, sometimes singling out China.
Making A Distinction
Extra lately, he has downplayed the company fee minimize and centered as a substitute on making the TCJA everlasting. However to the diploma Trump campaigns on coverage in any respect, he’s extra prone to concentrate on immigration and crime than on taxes.
Meaning Biden must distinction his tax agenda with that of congressional Republicans as a lot as Trump. Nonetheless, there are some stark contrasts between the present and former presidents on the subject of taxes.
Trump favors a 15 p.c company tax fee. Biden favors 28 p.c. Biden desires the US engaged in worldwide tax reform. Trump doesn’t.
Trump desires to make all provisions of the TCJA everlasting and has been silent about making up the projected revenue loss of more than $3 trillion. Biden would lengthen particular person provisions of the TCJA just for these making $400,000 or much less. And would finance that effort, at the very least partially.
Concepts Dropped
Whereas Biden reprised many concepts he’s espoused up to now, he ignored some previous proposals, at the very least this week. For instance, he by no means talked about taxing accrued capital gains even when buyers haven’t offered belongings. Nor did he focus on taxing capital gains on unsold assets at death, which might make it tougher to keep away from tax on funding income remodeled a decedent’s lifetime. It’s not clear whether or not any of those concepts will seem in his extra detailed price range due subsequent week.
Lastly, Biden was silent on previous plans to increase the solvency of Social Safety, an effort that might require payroll tax will increase on staff. As a substitute, he mentioned what he wouldn’t do, together with elevating the retirement age.
A Political Message
A few of Biden’s proposals could also be more practical as a political message than as a software to lift income.
For instance, the present 1 p.c tax on inventory buybacks has had little influence on company inventory repurchases and whereas 4 p.c levy could discourage some buybacks, most doubt it might change habits a lot. In a forthcoming evaluation, TPC estimates that within the absence of any excise tax, the US tax benefit for buybacks over dividends is 7.2 p.c. About two-thirds of the full US tax benefit is attributable to overseas shareholders.
Equally, capping company tax deductions for non-executive worker compensation is unlikely to alter pay practices. For one factor, the brand new tax would apply solely to publicly traded C companies. However many extremely paid workers, corresponding to docs, attorneys, financiers, and athletes are at companies with different enterprise buildings corresponding to partnerships, S companies, and restricted legal responsibility companies.
Whereas Biden’s tax platform technically was a preview of his fiscal 2025 price range, in an election yr a deeply divided Congress is unlikely to move any of those adjustments. However whereas Biden spoke to lawmakers, they had been probably not his viewers. 2024 voters had been.