4 Quick Facts about Biden’s FY2024 Budget Proposal
President Biden on Thursday released his budget proposal for Fiscal Year 2024, which will run from October 2023-September 2024. Among other things, the president’s plan would increase taxes, implement price controls, and expand green energy subsidies. Here are four things to know about the president’s budget proposal.
1. Biden’s budget can’t make it through the Republican-controlled House.
Shortly after the White House released the budget proposal, House Speaker Kevin McCarthy (R-Calif.) tweeted, “President Biden just delivered his budget to Congress, and it is completely unserious. He proposes trillions in new taxes that you and your family will pay directly or through higher costs. Mr. President: Washington has a spending problem, NOT a revenue problem.”
Even The New York Times admitted off the bat that the budget proposal was “dead-on-arrival,” saying that his budget “has no chance of driving tax or spending decisions in Congress this year, but instead will serve as a statement of political priorities.”
House Republicans are demanding spending reductions in exchange for raising the debt ceiling, a limit which the federal treasury hit on January 19. Biden has refused to consider tying another debt ceiling increase to spending reductions.
2. Biden’s budget claims $3 trillion in deficit reduction by manipulating the timeline.
According to the White House, “The President’s Budget reduces deficits by nearly $3 trillion over the next decade.” More precisely, the budget predicts $2.857 trillion in savings from 2024-2033.
But National Review’s Philip Klein writes that the budget provides those savings “only when measured against the budget that was already inflated by his first two years in office.” He explained that, in February 2021, “CBO projected deficits of $14.5 trillion from 2021 to 2031.” Two years later, CBO had revised that projection to $20.5 trillion — an increase of $6 trillion over Biden’s first two years. Klein said the Biden budget would reduce the 10-year deficit total from $20.5 trillion to $18.9 trillion between 2021-2031 (the Biden budget projects the largest savings, totaling $900 billion, in 2032-2033). “In other words,” Klein concludes, “deficits would still be $4.4 trillion higher [from 2021-2031] than what was anticipated when [Biden] took office.”
The phrasing “reduces deficits by nearly $3 trillion over the next decade” is also misleading because it gives the impression Biden’s budgetary proposal would gradually whittle down the deficit. But Biden’s proposal would do no such thing — far from it! According to the White House’s proposal, deficits would fluctuate from year to year, gradually increasing from $1.376 trillion in 2022 (actual) to $2.035 trillion in 2033 (projected). Somehow, the White House claims to reduce the deficit for each year by an amount between $17 billion to $501 billion, yet the annual deficit never drops below $1.5 trillion, according to Biden’s plan.
3. Biden’s budget finances additional spending through trillions of dollars in tax increases.
President Biden’s budget proposes multiple tax increases totaling trillions of dollars over the next 10 years. Estimates vary from “more than $4.5 trillion” to “a staggering $5.5 trillion.” Assuming they generate expected levels of revenue, these would help to pay for substantial increases in discretionary spending.
a. Corporate Taxes
President Biden’s budget proposes to increase corporate taxes by one-third, from the current rate of 21% up to 28%. It also proposes to reinstate a tax canceled in 2017 that heavily penalizes corporations bringing overseas profits into the U.S., which led to many companies storing those profits elsewhere. Businesses pass corporate taxes along to consumers in the form of higher prices.
b. Personal Income Taxes
President Biden’s budget proposes a “minimum tax on billionaires,” imposing a minimum 25% tax on those with a wealth of more than $100 million, which would apply to only 700 Americans. However, it also reestablishes a top individual income tax bracket at a rate of 39.6% (up from 37%) for individuals making more than $400,000 per year, or households making more than $450,000 per year.
c. Investment Taxes
President Biden’s budget proposes a number of tax increases on investment income as part of its drive to “focus tax policy on rewarding work not wealth.” These include increasing the tax on capital gains for high earners, quadrupling a tax introduced in 2022 on stock buybacks, and ending various provisions which the White House calls “loopholes.” The “loopholes” Biden’s budget proposes to “close” include “like-kind exchanges” and “carried interest.” In a like-kind exchange, a small business owner exchanges real property used for business for other property of a like kind; Biden’s proposal would tax the property exchanged in such transactions, crippling small business owners. Carried interest is a form of capital gains earned by private equity managers that Biden proposes to tax at a higher rate.
Biden’s budget also proposes to tax “unrealized” capital gains, which amounts to “taxing income that doesn’t exist,” explained National Review’s Noah Rothman. An unrealized gain occurs when an asset like a stock increases in value, but the owner doesn’t sell it — he doesn’t realize the gain. So, if a certain American bought 100 shares in a company at $10 each, and they increased to a value of $15 each, the Biden budget would tax him for an unrealized gain of $500. If the owner later sold the shares at a price of $8 each, the government would not refund him the taxes he was made to pay on an unrealized gain of $500, even though he actually lost $200. That’s why Rothman said Biden’s budget proposes to tax income that doesn’t exist.
d. Medicare Taxes
The Biden budget proposes to make some businesses and top earners pay more in Medicare taxes, increasing “the Medicare tax rate on earned and unearned income and the NIIT rate from 3.8 percent to 5 percent for the wealthiest Americans.”
In conclusion, President Biden’s budget proposes a wide array of tax increases, of which these are just the headlines. The White House boldly promises that “no one earning less than $400,000 a year will pay a penny more in new taxes, period.” But that is far from true. For starters, the income tax increase on households earning more than $450,000 would apply to plenty of individuals earning less than $400,000. Many of the investment tax increases will harm small business owners earning less than $400,000 per year, not to mention punishing ordinary Americans for saving and investing their money. Corporate taxes, too, are a hidden tax on consumers and employees, since it hampers businesses’ ability to lower prices and raise wages.
4. Biden’s budget packs in progressive policy priorities.
President Biden’s budget proposes $600 billion to create free child care and early education programs, so that government-endorsed caretakers can begin indoctrinating children at even earlier ages. It proposes $90 billion to sponsor free community college so that more people come in contact with the higher education system. It proposes $156 billion in income support for low-earners without children and $103 billion to subsidize low-income renters and home ownership, instead of pursuing policies that promote the dignity of work and help workers stand on their own two feet. It also proposes to expand Obamacare, Medicaid, and other health care policies for $534 billion (which would include abortion funding if Biden could get it). It would also implement national, comprehensive paid family leave for $325 billion.
For other items, the price tag is smaller, but this still represents progressive priorities. For instance, the budget expands the Environmental Protection Agency by 2,400 staff, spending an additional $240 million on enforcement efforts. It also proposes “nearly $5 billion to address the climate crisis” and $1.8 billion for “environmental justice.” It proposes to cut fossil fuel tax credits and subsidize offshore wind energy instead.
The Biden budget also proposes $3 billion specifically “to advance gender equity and equality” internationally, and another $50 billion in foreign aid that can be used for that purpose.
In his proposed budget for Fiscal Year 2024, President Biden gave his progressive allies most of what they wanted and House Republicans nothing to entice them to pass the plan. It spends heavily, taxes heavily, and lays on the progressive agenda heavily.
Joshua Arnold is a staff writer at The Washington Stand.