With economic advancements in Russia, China, and other giants, the United States is no longer the eminent global superpower it once was. Joe Biden’s new spending proposals––including the American Jobs Plan and the American Family Plan––aim to solidify the country’s role as the world’s leading economic power. While there is bipartisan support for certain elements of his proposals, the main issue lies in their mind-boggling costs. To be specific, these two new proposals are estimated to cost close to 4.1 trillion dollars in total. In order to raise the necessary money, Biden’s new tax plan will have two areas of focus. The first is increasing taxes on corporate profits. The second is raising the capital gains and income tax rates for some of the wealthiest Americans.
Raising Corporate Tax Rate
The history of corporate profit tax rates has been a major factor in the success of nationwide companies for years. Up until 2017, the largest companies in the country paid up to 35% of their incomes in taxes. With new tax breaks courtesy of Donald Trump, however, the top corporate profit tax rate dropped to 21%. Supporters of the tax reduction argue it worked to stimulate the growth of major corporations, which, as a result, have hired more employees.
Unfortunately, setting the corporate profit tax rate to 21% will not generate the 2.3 trillion dollars needed for the American Jobs Plan. As a result, Biden has stated that his plan will increase the tax rate to 28%. Opposers to the corporation tax hike argue that it will lead to larger companies hiring fewer Americans. On the other hand, supporters argue that it will allow the American Jobs Plan to create significantly more occupations.
Capital Gains and Taxing the Wealthy
Currently, the top 1% of earners in the United States account for close to 30% of the country’s total household wealth. In pushing forward his American Family Plan, Biden has made it clear that only the most prosperous citizens will see higher tax rates. Specifically, the maximum federal income tax rate will now be 39.6% for citizens with incomes above $400,000, from 37% previously. The real controversy, however, stems from the fact that Biden’s tax plan will also raise the top tax rate on capital gains (investment profits) from 20% to 39.6%.
In the eyes of many, Biden’s capital gains tax raise will prove to be devastating to the stock market if passed. Suzanne Clark, CEO of the U.S. Chamber of Commerce, even went as far as to call the proposed legislation “outrageous”. Many opposers claim that the tax increase will have disastrous effects as it ripples throughout the U.S. economy.
Joe Biden’s tax plan is intent on ensuring that the middle class will not be further squeezed in paying for his new proposals. Whether the plan’s strong grip on corporations and the wealthy will be justified largely depends on the success of the president’s spending proposals. The impact of the proposals on the economic recovery and reinvigoration of the United States in the decades to come will make all the difference.