President Joe Biden is proposing massive corporate and income tax hikes to pay for his latest package aimed at bringing the nation out of the COVID-19 recession.
The “American Families Plan” includes hundreds of billions of dollars for family and paid sick leave, health care subsidies, two years of free community college and expanded aid for four-year colleges.
This package, like his COVID-19 relief plan signed in March and his infrastructure plan, boasts a massive price tag in the trillions of dollars, drawing the ire of Republicans and now with the infrastructure plan, wariness from members of his own party, the Democrats.
Biden is set to outline his plan during a 9:00 p.m. primetime address on April 28 before a joint session of Congress.
“[T]hese are about the highest value economic investments we can make for our future economic competitiveness,” said a senior administration official.
Notably, however, the plan makes no mention of a federal repeal on the $10,000 cap on state and local property tax deductions.
“The SALT deduction, obviously, is something that costs money,” said a senior administration official. “We recognize and have heard from others who are prioritizing that, and that’ll be part of the conversation going forward.”
New Jersey’s congressional delegation, where many residents have been hit the hardest by the cap given the state’s high property taxes, has been pushing for a repeal on that limit to be included in any of the president’s relief packages.
“It is not negotiable. We should have what is one of the oldest deductions in the tax code,” U.S. Sen. Robert Menendez, a Democrat, said during a Newark press conference on April 26. “New Jersey is a blue-chip maker state that gives more to the federal Treasury than it receives. There are other moocher states that get billions of dollars more than they give.”
The programs and their price tags would be spread out over the next 15 years, according to the White House.
Key features in the plan:
- $109 billion for free community college. A smaller-scale version exists in New Jersey, known as the Community College Opportunity Grant, championed by Gov. Phil Murphy.
- Pell grants for four-year universities increase by $1,400, for a price tag of $80 billion
- $225 billion over the next decade for paid family and medical leave. Workers get up to $4,000 a month, a minimum replacement of two-thirds of the average weekly wages. The White House cited research that more than 30 million workers do not have access to sick time. A limited form of mandated paid sick leave was included in the Coronavirus Aid, Relief and Economic Security Act, but that was for just two weeks.
- $2 billion toward “modernization” of the unemployment system, which in states including New Jersey came under increased strain from soaring joblessness amid the pandemic. State labor officials contend that any substantive reforms would need to start at the federal level.
- $800 billion for tax cuts and other tax credits for families, including expansions to Affordable Care Act subsidies, and the Earned Income Tax Credit and the Child and Dependent Care Tax Credit.
Who’s paying for it:
Like his infrastructure plan, Biden’s proposal would count on some of the nation’s highest earners to pick up the tab.
- An increase of the top income tax rate to 39.6%, reversing a key feature of the 2017 federal tax cuts, which lowered the rate to 37%. According to the Biden administration, this would affect the wealthiest 1% of American earners.
- $80 billion to the Internal Revenue Service so it can more thoroughly audit and go after wealthier claimants and ensure they’re paying their full tax bill. The White House estimates this would bring in $700 billion over the next decade.
- Closing tax loopholes, including gains tax and carried interest loopholes, “so that hedge fund partners will pay ordinary income rates on their income just like every other worker,” the White House said.
- An end to the process of “stepping up” for gains above $1 million, to go after money “passed down across generations untaxed.” There would be exemptions for family-owned businesses and farms.