If President Biden does manage to pull off a reelection
victory next year,
get set for a tax increase with many of the
provisions in the Republican Parties 2017 Tax Cut
and JOBS Act set to expire at the end of
2025. In a Wall Street Journal article this week,
two former Biden economic advisors outlined what we can expect
in a second term and our panel is back with
a preview.
So, Alicia, you looked at that op-ed,
I know in detail. They really laid it out there.
They said, look, you're going to see your taxes go
up.
What taxes would go up?
Well, you have to recall in
2017 the Republican tax reform cut individual tax rate across
across the board. So for both
lower earners and higher earners,
reducing the top rate from about
39.6 now to 37%. Now all these would expire in
addition to the higher standard deduction,
which by the way disproportionately benefit lower earners.
And So what they're now saying is if you want
to extend these middle tax cut tax cuts,
we're going to require an increase in some other taxes
and namely the corporate tax rate which also fell from
35 to
21%. Now that was actually made permanent by the reform.
But they also have some other ideas,
including this quote UN quote,
wealth tax that they've been bandying around actually for last
couple of years,
which would be a tax on unrealized
income as the capital gains that people actually,
So people sell or don't sell stock,
they'd still be taxed on the appreciation in their assets.
Yeah, Kim, that's you're talking about really
a couple of trillion dollars worth of tax increases here.
And I guess because those tax cuts expire,
it would give them political leverage
and they would basically say look,
we're going to we'll we'll do those middle class tax
cuts,
we'll keep those, but only if we double down on
the tax increases that are going to be for all
of you.
I guess they would think it's somehow Republican voters.
How is that going to play politically?
Yeah, I mean, it's going to come in at enormous
cost,
Paul, because they're also, they want to go over ratchet
back up foreign profits of corporations as well too.
They're looking at the estate tax.
There's a lot of things they're going to go after.
It depends on how Republicans handled this.
They've they've got to go out and make the argument
that tax benefits are overall good for the economy,
up and down, all the different brackets.
And they also need to get into some of the
other things that are really going to be the goal
of raising these rates,
which they're going to talk,
the Democrats will talk about these middle class tax cuts.
But what the real ambition is to use a bunch
of the revenue that they could then gain,
holding those tax cuts hostage to roll it back into
other liberal priorities for existence.
The expansion of the earned income tax credit for lower
income earners.
You expect them to talk as well about
making the child tax credit refundable,
meaning for those that don't currently pay taxes,
that's one of the bigger ambitions.
Those programs are extremely expensive,
also, some of them riddled with fraud.
But it's going to be up to Republicans to point
out that a lot of this is going to be
about creating more revenue for what essentially are going to
be transfer payments. Yeah. Just to put a finer point
on that,
Dan, traditionally the share of federal,
federal spending share of of the
national economy, it's been about 21%
historically. They want to keep it up at 24 where
it is now or 25 and that means they're going
to have to do a lot,
get a lot more revenue.
What I can't see is how you get that revenue
out of the rich.
There's just not enough rich in America.
So ultimately you're going to have to go to the
middle class,
but they really do want a much bigger federal government
quarter of the
of the the national economy at least.
Yeah, that's precisely the point.
I mean just one quick data.
The Tax Foundation notes that they're,
I mean this Democrats are targeting the top 5%.
They already pay about 62%
of all income taxes. And one of the things these
authors said in their article is that the current tax
cuts are what they call
unpaid for tax cuts, quote UN quote.
There was a time when we talked about unpaid for
tax cuts.
We were talking about spending cuts to try to pay
for them.
There is nothing in that article about cutting spending as
you suggest,
Paul. In fact, their word for it is obligations that
the government has to meet,
and they do down at the bottom of it,
note that the there's the rising cost of healthcare,
and that suggests that taxes are going to have to
be increased to pay for Obamacare and Medicare and Medicaid,
which suggests that would send us in the direction of,
say, Canada or the United Kingdom,
whose nationalized healthcare systems are underfunded and indeed failing.
So this is really what they're proposing is a tax
bridge to nowhere.
Spending does not go down,
but taxes simply get rat it up.
There is really no alternative as you suggest,
than to go after the middle class eventually.