Biden Looks to Raise Taxes on Wealthy and Corporations to Shave Deficit

Lael Brainard, the director of the National Economic Council, said lawmakers should raise taxes on companies and the wealthiest while extending the 2017 cuts for those making less than $400,000.

Lael Brainard speaks from behind a lectern that has two microphones and the words “The White House Washington” written on the front.
Lael Brainard, head of the National Economic Council, expressed more concern about growing debt and deficits on Friday than President Biden and his aides had previously demonstrated when discussing taxes.Credit…Pete Marovich for The New York Times

Jim Tankersley

President Biden’s top economic adviser said on Friday that lawmakers should take advantage of a looming tax debate next year to try to reduce budget deficits by sharply raising taxes on corporations and the rich.

Under that plan, Mr. Biden would more than offset the cost of maintaining tax cuts for people earning $400,000 a year or less.

In a speech to the Hamilton Project at the Brookings Institution in Washington, Lael Brainard, who directs the White House National Economic Council, gave the most detailed explanation yet of how Mr. Biden would seek to shape what promises to be a multitrillion-dollar tax debate.

A batch of tax cuts signed into law in 2017 by President Donald J. Trump, who is facing Mr. Biden in a rematch this fall, is set to expire at the end of next year. It includes cuts for individuals at all income levels. Republicans built that expiration into the tax bill to reduce its projected cost to deficits and comply with congressional rules.

Ms. Brainard’s speech renewed Mr. Biden’s commitment to reducing taxes for middle-class Americans and for raising them on high earners. But her remarks expressed more concern about growing debt and deficits than the president and his aides had previously demonstrated when discussing the looming tax debate.

“At minimum, we should avoid making the fiscal hole created by Republican tax cuts deeper, by fully paying for any tax cuts that are extended,” Ms. Brainard said, in remarks released by the White House. “And we should use the 2025 tax debate as an opportunity to meet our national needs by raising revenue overall by asking the wealthy and large corporations to pay their fair share.”

The comments reflect a growing effort by Democrats and Republicans to set the terms of what promises to be a major tax debate next year.

Mr. Trump and his congressional allies have sought to extend all of the expiring cuts, a move that the nonpartisan Congressional Budget Office said this week could add as much as $4.6 trillion to the federal debt over a decade.

Mr. Biden has said repeatedly that he wants to extend only the individual cuts for households earning less than $400,000 a year. He would allow other cuts to expire. The Committee for a Responsible Federal Budget in Washington, a group dedicated to reducing deficits and the nation’s growing debt load, calculates that Mr. Biden’s extension of those provisions would most likely cost $1.5 trillion to $2.5 trillion over a decade, but possibly as much as $4 trillion, depending on which provisions the president chooses to extend.

Mr. Biden’s latest budget proposes nearly $5 trillion in tax increases on high earners and corporations. It also includes about $2 trillion in new spending programs.

In her speech, Ms. Brainard reiterated Mr. Biden’s calls for higher taxes on the wealthy and large corporations, including an increase in the corporate tax rate to 28 percent. That would be higher than the 21 percent that Mr. Trump’s law, the Tax Cuts and Jobs Act, ushered in but lower than the 35 percent rate that existed before the 2017 tax package passed.

She also appeared to suggest that Mr. Biden would seek to maintain some limits on tax deductions for households earning more than $400,000 a year, including those that were set to expire at the end of next year. Most notably, that could include maintaining a $10,000-a-year limit on the amount of state and local taxes that higher earners could deduct from their federal income taxes, which has been a hot-button issue in higher-tax and predominantly blue states like New York and California.

“Achieving a fairer tax system also means we cannot extend expiring T.C.J.A. tax cuts for those with incomes above $400,000 or bring back deductions and other tax breaks for these households,” she said, referring to the 2017 law. “As the president has said, tax cuts for the wealthy will stay expired on his watch.”

Ms. Brainard also called for additional tax assistance for some lower- and middle-income Americans, by restoring an enhanced child tax credit that Mr. Biden signed into law on a temporary basis in 2021. That credit increased assistance for parents and helped cut child poverty sharply in the year it was enacted, but Democrats did not extend it for 2022 or beyond. She also called for making permanent an enhanced tax credit to help people buy health insurance through the Affordable Care Act.

Jim Tankersley writes about economic policy at the White House and how it affects the country and the world. He has covered the topic for more than a dozen years in Washington, with a focus on the middle class. More about Jim Tankersley

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