US Democrats mitigate Joe Biden’s tax plans

Biden’s party has a slim majority there too. However, some senators like Joe Manchin are already pushing for tax and spending plans to be cut. “As it is, I’m not going to approve the budget package,” said the West Virginia Democrat, suggesting a budget of $ 1.5 trillion.

The opposition Republicans have so far unanimously rejected Biden’s plans, also because they would reverse the tax cuts that the Trump administration had decided on. The Democrats can afford three dissenters in the House of Representatives, but they rely on every vote of their senators.

For Biden, the approval of the budget after the economic stimulus package of a good two trillion dollars and the infrastructure package of a good trillion dollars already passed by the Senate would be the third blow in his economic and financial policy.

The massive increase in government spending has met with criticism from some economists because it catapults US debt to more than 100 percent of economic output and is seen as a potential driver of inflation. However, the spending plans can only be implemented if Congress agrees to raise the current debt ceiling of $ 28.4 trillion.

Domestic political pressure is on Biden

Biden urgently needs domestic political success, as he is also under criticism in the USA after the unsuccessful withdrawal of US troops from Afghanistan and the increasing corona infections. More than half of Americans were unhappy with their president according to recent polls.

The Democratic majority in the House of Representatives is proposing tax increases of more than two trillion dollars over the next ten years. Corporate income tax for companies is to rise from the current 21 to 26.5 percent. Biden had asked for an increase to 28 percent.

American companies will soon pay at least 16.6 instead of 10.5 percent tax on their income earned abroad. Here, too, the president wanted a higher minimum tax rate of 21 percent.

The top income tax rate for annual incomes greater than $ 400,000 is expected to rise from 37 to 39.6 percent. Americans with a taxable income of more than five million dollars a year should also pay a three percent surcharge on their personal tax rate.

His party friends are lagging behind Biden’s plans when it comes to capital gains tax: instead of 39.6 percent, the highest tax rate is only to be raised from 20 to 25 percent. Overall, the Democrats expect that the tax hikes for top earners will give them an additional $ 1 trillion in the treasury.

Wealth remains largely untouched

The wealth of the super-rich, on the other hand, remains largely untouched. Even the long-fought tax loophole for hedge fund managers and private equity managers is hardly being plugged. The finance professionals can continue to declare the so-called “carried interest” income at the lower rates of capital gains tax instead of taxing it as normal income. However, the holding period for the financial assets is to be extended from three to five years.

Senate Republican minority leader Mitch McConnell, however, condemned the Democrats’ plans as “extreme left,” predicting that the tax hikes would kill jobs, disadvantage families and make US businesses less competitive with China. Criticism also came from business associations such as the American Chamber of Commerce.

For Biden and his Democrats, however, the 3.5 trillion budget is the most important building block of his policy in favor of the American middle class. Much of the spending will go to the Social Security for the Elderly, Medicare.

In addition, there are tax improvements for families with children, higher spending on education and state aid for small businesses. At the same time, Biden wants to promote the climate-neutral transformation of the economy through massive investments and aid and thus ensure that the USA will reduce its greenhouse gas emissions by half by 2030.

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