How Biden Plans to Tax the Rich
Are Biden’s efforts to tax the rich and slow down inflation going to work?
Federal Budget Overview
On the 28th of March 2022, President Joe Biden released a 2023 federal budget that proposes tax hikes on the ultra-wealthy and corporations.
It also requests billions of dollars in new spending for the Defense Department and Justice Department.
A 20% “Billionaire’s Minimum Tax,” was sent to Congress and is a 20% income tax rate for the top .01% of earners and includes households worth more than $100 million.
This budget is shifting its focus away from Covid-19 and toward the new mission of securing NATO allies abroad in the wake of Russia’s invasion of Ukraine.
The proposal sent to congress promotes a federal budget reduction of more than $1 trillion over the next decade.
White House officials credited Biden’s economic policies with being strong enough to cut back on pandemic assistance programs.
Due to higher tax revenue and fewer pandemic assistance costs, the White House predicts the 2022 budget deficit will be $1.3 trillion less than the 2021 deficit.
Where is the Money Going?
The budget adds $31 billion in new defense spending, bringing the total national defense spending up to $813 billion.
$6.9 billion of the defense spending is directed to NATO, Ukraine, countering Russian aggression, and European defense.
$20.6 billion is going to the Justice Department to help fight crime at home along with another $3.2 billion for state and local law enforcement grants.
Part of the $3.2 billion will be for hiring additional police officers.
$10.6 billion is going towards global health security which includes helping against Covid and future pandemics.
Where is the Money Coming From?
Raising the corporate tax rate from 21% to 28%.
Biden’s proposed 20% minimum tax on the top .01% of earners and households worth over $100 million.
Raising the top individual tax bracket to 39.6%.
The repeal of several tax breaks for oil and gas producers and processors.
The so-called carried interest loophole is being closed by taxing carried interest as regular income.
Are These Good Moves?
During periods of economic prosperity, the government and the Federal Reserve may employ contractionary policies to slow down the hot economy.
Contractionary fiscal policy is when the government collects more money in tax revenue than it spends, which aligns with Biden’s proposed economic policies.
The Federal Reserve has also been employing contractionary monetary policy by starting to increase the fed funds rate. This has caused banks to have less money to lend so they will increase their lending rates.
This change has caused mortgage rates to rise. I talk more about this in my blog titled Why Mortgage Rates are Soaring.
What do People Think?
According to a new NBC News poll released on the 27th of March 2022, only 40% of Americans approve of the job Biden is doing as president, with 55% disapproving.
More Americans say Biden is more to blame for inflation than the pandemic or corporate price increases.