The White House has released President Joe Biden’s newest budget proposal, an aspirational plan that would raise taxes on corporations and the wealthy to fund some major spending priorities.
The budget is for 2025 but includes revenue and spending projections for several provisions for the next decade. The budget includes $7.3 trillion in spending and $5.5 trillion in tax revenue, bringing the deficit for 2025 to nearly $1.8 trillion.
Biden and the White House contend the budget would narrow the deficit, while Republicans have blasted the blueprint for its proposed tax hikes and spending programs.
Critics have also lined up to pan the plan for what they see as budget gimmicks that make its fiscal footprint look smaller.
“This is not a serious effort at controlling the debt or deficit, not a serious fiscal policy document,” Douglas Holtz-Eakin, the director of the center-right think tank American Action Forum and the former director of the Congressional Budget Office, told the Washington Examiner.
Here is a breakdown of what Biden’s budget proposes and some of the plaudits and critiques it has received.
Taxes
None of the tax proposals in the Biden budget are really surprising. Many of them are tax hikes the White House has called for previously and unsuccessfully attempted to get included in other spending packages. Still, if passed as proposed, the plan would significantly raise taxes, from roughly 18% of GDP to over 20%.
James Capretta, a senior fellow at the American Enterprise Institute, told the Washington Examiner that the tax-and-spend agenda in Biden’s budget is “very consistent” with the priorities the president has highlighted since taking office.
Biden’s tax agenda largely centers on higher taxes in two key groups: the wealthy and corporations.
The proposal includes hiking the headline corporate tax rate from 21% to 28%, a push he has unsuccessfully made in the past. The 2017 tax cuts, championed by then-President Donald Trump, lowered the corporate rate from 35%.
Raising the corporate tax rate to 28% would raise some $1.35 trillion over the next decade or so, according to White House projections.
Biden also wants to raise the corporate minimum tax from 15% to 21% and introduce more stringent limits on corporations’ ability to deduct wages of high-paid employees, according to the White House.
Also in Biden’s budget is a 25% minimum tax for billionaires. That provision would only affect the wealthiest 0.01% of taxpayers, according to the White House, and would raise about $500 billion in revenue over the next decade.
Additionally, the White House said it wants to keep the 2017 Trump tax cuts for those earning under $400,000 after they expire, but the new budget doesn’t offer a plan on what specific tax hikes will be pursued to pay for that massive cost to the Treasury.
The White House said it wants to fund the lower rates for the middle class through “additional reforms to ensure that wealthy people and big corporations pay their fair share,” although it hasn’t offered specifics. Filling that gap would require enormous amounts of fresh tax revenue not outlined in the budget.
Spending
The budget also includes some big-ticket spending items and policy proposals that Democrats have tried to include in other legislation since Biden was sworn into office.
Capretta said the budget includes some of the “things that got left out of Build Back Better” and extends provisions that were passed as part of the Inflation Reduction Act.
The budget would revert the child tax credit to the supercharged level it was at temporarily in 2021 as part of the American Rescue Plan Act, which had no Republican support.
The current tax credit is $2,000 a child. The Biden proposal would raise it to $3,600 for children under 6 and $3,000 for older children and remove the income threshold for those who receive the funds. Thus, a family with no income or head of household working would also receive the full $3,600 or $3,000 payments. Recipients would also be able to receive the credit in the form of monthly payments from the government.
On the education front, Biden’s budget would increase the discretionary maximum Pell Grant to $8,145, an increase of $750 from its current level. Biden’s plan would also eliminate student loan origination fees and expand free community college to more people.
The proposal also includes several housing provisions. Housing affordability is at all-time lows, and higher shelter costs have been further pushing up overall inflation and making life more difficult for consumers.
The White House plan includes a $5,000 tax credit for middle-class, first-time homebuyers for two years, which is described as a form of mortgage relief. Mortgage rates have been at their highest level since the turn of the century as a result of the Federal Reserve’s tightening, adding to the housing market’s woes.
The president also wants Congress to approve a $10,000 credit for people who sell their starter homes. The White House described that credit as a response to the decrease in supply because pandemic-era homebuyers aren’t putting their homes on the market because of the higher mortgage rates.
Biden’s budget also calls for a national, comprehensive paid family and medical leave program, providing up to 12 weeks of leave for eligible workers, which would cost $325 billion over the next decade.
The feasibility of getting both the tax and spending changes passed will depend on this year’s elections. Right now, Biden’s agenda has essentially no chance of going anywhere, given that Republicans control the House and Democrats hold only a tenuous grip of the Senate, in which centrists such as Sens. Joe Manchin (D-WV) and Kyrsten Sinema (I-AZ) have pushed back on some of the president’s tax-and-spend proposals.
“I don’t see anything happening between now and the election on this front,” said Holtz-Eakin, the former CBO director.
Praise and criticism
Praise for the White House budget proposal is coming from Democrats, with jeers from Republicans, about what could be expected, given the budget offers few surprises and largely re-ups failed tax-and-spend agenda items.
“The budget that was released today would continue the effort to grow the economy from the middle out and the bottom up with a focus on working families and middle-class families and, of course, low-income families all across America,” House Minority Leader Hakeem Jeffries (D-NY) said on MSNBC. “It’s a budget that will continue the work to lower costs for everyday Americans.”
Meanwhile, Republican leadership in the House bashed the budget as hyperpartisan and branded it a “road map to accelerate America’s decline.”
“While hardworking Americans struggle with crushing inflation and mounting national debt, the President would increase their pain to spend trillions of additional taxpayer dollars to advance his left-wing agenda,” they said in a statement.
One criticism budget hawks have with the bill is the inclusion of “gimmicks.”
For instance, the fiscal effects of the expanded child tax credit are modeled in the budget, but only for 2025, meaning its effects on the deficit are only being modeled on a temporary one-year basis rather than what it would look like if it were expanded for the whole 10-year budget window.
“It only includes the first year of a policy that he surely wants to make permanent. That’s about $800 billion in costs that the president is not counting,” Brian Riedl, a budget expert at the right-leaning Manhattan Institute, told the Washington Examiner.
The housing aspects of the legislation are also being attacked by some economists. Some experts argue they could further harm the situation by not addressing underlying supply problems, and worse, could even cause demand to rise.
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“There’s very little on this that is actually going to fix the problem,” Mark Calabria, the former director of the Federal Housing Finance Agency, said during a recent interview about the Biden plan, adding that it could make the situation worse.
“These things are ultimately going to increase demand when, fundamentally, the problem is supply,” Calabria continued. “Econ 101. If you juice up demand, you’re not going [to] increase sales. You’re just going to increase prices. You’re not helping anybody.”