Joe Biden Planning First ‘Major Federal Tax Hike’ in Almost 3 Decades
Hike expected to hit businesses hard
Joe Biden is preparing to follow up on his controversial COVID-19 stimulus bill with the “first major federal tax hike” in almost thirty years.
Bloomberg News reported:
“Unlike the $1.9 trillion Covid-19 stimulus act, the next initiative, which is expected to be even bigger, won’t rely just on government debt as a funding source."
“While it’s been increasingly clear that tax hikes will be a component — Treasury Secretary Janet Yellen has said at least part of the next bill will have to be paid for, and pointed to higher rates — key advisers are now making preparations for a package of measures that could include an increase in both the corporate tax rate and the individual rate for high earners.”
Head of U.S. public policy at Evercore ISI and Biden's former economic aide, Sarah Bianchi, said:
“His whole outlook has always been that Americans believe tax policy needs to be fair, and he has viewed all of his policy options through that lens."
“That is why the focus is on addressing the unequal treatment between work and wealth,” Bianchi added.
The Tax Foundation reports that “the top 1 percent paid a greater share of individual income taxes (40.1 percent) than the bottom 90 percent combined (28.6 percent).”
Biden sources say the administration was going to push for the following tax policies:
- - Raising the corporate tax rate to 28% from 21%
- - Paring back tax preferences for so-called pass-through businesses, such as - - - Limited-liability companies or partnerships
- - Raising the income tax rate on individuals earning more than $400,000
- - Expanding the estate tax’s reach
A higher capital gains tax rate for individuals earning at least $1 million annually.
Former undersecretary in the Treasury Department, Lawrence Summers, said Biden’s coronavirus stimulus package cause massive inflation, arguing Biden’s stimulus “is three times as large as the projected shortfall” and “relative to the size of the gap being addressed, it is six times as large.”
“Given the commitments the Fed has made, administration officials’ dismissal of even the possibility of inflation, and the difficulties in mobilizing congressional support for tax increases or spending cuts, there is the risk of inflation expectations rising sharply,” Summers wrote.
“Stimulus measures of the magnitude contemplated are steps into the unknown."
"For credibility, they need to be accompanied by clear statements that the consequences will be monitored closely and, if necessary, there will be the capacity and will to adjust policy quickly.”
President of Bianco Research, Jim Bianco, said a serious threat of inflation would ruin the real economy and the stock market.
“If we get to 2.6% or 2.7% on the core [inflation] number, that’s the highest level we would have in 30 years,” Bianco noted.
“With the 10-year yield at 1.1% and with the stock market at a new high and a forward P/E ratio of 24 [times earnings] that’s going to be a problem for risk markets to see that kind of level of inflation even if the Fed says that they want that level of inflation.”