President Joe Biden’s economic team at the White House is determined to make good on his campaign pledge to raise taxes on the rich, emboldened by mounting data showing how well America’s wealthy did financially during the pandemic.
With Republican and business-lobby opposition to the administration’s tax plans stiffening, Democrats need to decide how ambitious to be in trying to revamp the tax code in what’s almost-certain to be a go-it-alone bill. Interviews with senior officials show there’s rising confidence at the White House that evidence of widening inequality will translate into broad popular support for a tax-the-wealthy strategy.
Biden himself has become convinced of the need, saying last week that those earning over $400,000 can expect to pay more in tax.
“2020 really did show him that there were so many of the fragilities across society” that need addressing, Heather Boushey, a member of the White House Council of Economic Advisers, said in an interview. Funding spending priorities given a shortfall in revenues from the 2017 Republican tax cuts “has really demanded the president sit down and think about both the enormous needs, and these questions we’re talking about as to how we tax,” she said.
Behind the scenes, aides have been working on a proposal to pay for some of the longer-term Biden agenda. Boosting income and capital-gains tax rates on top earners, along with levies on companies and an expansion of the estate tax, would help fund priorities such as infrastructure, climate change, and assistance for child care and home health care.
Lawmakers and the administration are stepping up discussions about what measures could pass later in the year. The Senate Finance Committee on Thursday will hold a hearing on the impact on employment and investment of the current U.S. international tax structure.
‘Major Reform’
Senior members of the administration, including David Kamin, deputy director of the National Economic Council, and Lily Batchelder, who’s been tapped to become assistant Treasury secretary for tax policy, have been working for years on options to raise revenue from the best-off Americans.
Kamin, who with Batchelder mapped out potential reforms in a 2019 paper called “Taxing the Rich: Issues and Options,” signaled in an interview that the following options are among those under discussion:
• Removing “step up in basis” for estates, which revalues assets such as stocks and real estate at market prices, rather than their original purchase cost—reducing tax liabilities
• Taxing capital gains for wealthy Americans at income-tax rates, which are higher
• A minimum tax for large companies
“The idea of finally eliminating what is a massive loophole, in that the highest income Americans escape tax on their wealth by addressing step up in basis and then taxing capital gains as ordinary income, is a major reform of our system, which I think is needed,” Kamin said in the interview.
“These would be major accomplishments, which would pretty fundamentally shift how our tax system treats the richest Americans and the largest corporations so they can’t escape tax in the ways they now can,” he said.
The administration is also looking at rolling back a portion of former President Donald Trump’s income-tax cuts, aides say.
“Anybody making more than $400,000 will see a small-to-a-significant tax increase,” Biden said in an interview with ABC earlier this month. For those under that level, there won’t be “one single penny in additional federal tax,” he said.
Major aspects of the plan have yet to be detailed, including the specifics of the threshold for higher taxes. The White House clarified last week that the $400,000 figure applies to families, but Deputy Press Secretary Karine Jean-Pierre suggested Friday that the level at which tax hikes would kick in for individuals isn’t yet set.
“It’s a little early—we’re still working out through the process,” Jean-Pierre said.