Biden’s budget plan: Higher taxes on rich, lower deficits

(NewsNation) — President Joe Biden officially unveiled his budget plan for fiscal year 2023 from the White House Monday, saying his administration is on track to cut the deficit by more than $1 trillion.

Biden announced a budget blueprint Monday that calls for higher taxes on the wealthy, lower federal deficits, more money for police and greater funding for education, public health and housing.

The proposal’s announcement comes ahead of midterm elections that could decide whether Congress remains under the Democratic party’s control.

Biden is proposing a total of $5.8 trillion in federal spending in fiscal 2023, which begins in October. That’s slightly less than what was projected to be spent this year before the supplemental spending bill was signed into law this month. The deficit would be $1.15 trillion.

“After my predecessor’s fiscal mismanagement, we’re reducing the Trump deficits and returning our fiscal house to order,” Biden said.

It’s a midterm elections pitch to a nation still off balance from a pandemic, an economic recession, a recovery, challenges to U.S. democracy, and war in Ukraine. The Biden budget foresees cutting annual deficits by more than $1 trillion over the next decade. Those reductions would occur in large part through higher taxes and the expiration of relief spending tied to the coronavirus outbreak that began in 2020.

“We still spend what we need to spend to continue to fight COVID,” Biden said on Monday. “Those expenditures will be dramatically less than last year.”

Like most presidential budgets, it’s a proposal and a set of ideals rather than the law of the land. Congress is responsible for implementing the budget through tax and spending legislation and annual agency funding.

The proposal faced immediate criticism from Republican lawmakers. They noted that deficits well in excess of $1 trillion annually would persist, said higher taxes could hurt growth and objected that additional government spending would feed into inflation.

“What this budget shows is that President Biden values more spending, more debt, more taxes and more pain for the American people,” said Rep. Jason Smith of Missouri, the top Republican on the House Budget Committee.

The budget would allocate $795 billion for defense and $915 billion for domestic programs. The remaining balance would go to mandatory spending such as Social Security, Medicare, Medicaid and net interest on the national debt.

The higher taxes outlined on Monday would raise $361 billion in revenue over 10 years and apply to the top 0.01% of households. The proposal lists another $1.4 trillion in revenue raised over the next decade through other tax increases that are meant to preserve Biden’s pledge to not hike taxes on people earning less than $400,000.

It also includes a minimum 20% tax on the incomes of households worth $100 million or more, similar to an earlier proposal Democrats in Congress began debating late last year to pay for Biden’s domestic spending plans. Those plans were put on hold after talks with West Virginia Sen. Joe Manchin collapsed.

On the tax front, it’s unclear how Biden would get his policies through Congress. He had previously negotiated down the proposed 28% corporate tax rate, and his new minimum tax on the ultra wealthy would include “unrealized gains,” which are potential profits that exist on paper because the underlying asset has yet to be sold.

The result is that the special tax on people worth more than $100 million is unlikely to become law any time soon, said John Gimigliano, head of federal legislative & regulatory services at KPMG.

“That is kind of like a slow burn proposal, like let’s continue to have this conversation over months or maybe years,” Gimigliano said.

While the budget would elevate funding for education, public health and provide $48 billion to increase the supply of affordable housing, it fails to spell out what the broader successor to Biden’s stalled “Build Back Better” agenda would be. That proposal from last year included money for child care, preschool, clean energy and lower health care premiums, but it was blocked by Manchin, the decisive Democratic vote.

White House Budget Director Shalanda Young told reporters the blueprint does not include line items tied to that possible bill because “discussions with Congress are ongoing.” But the budget plan includes a “ deficit neutral reserve fund” to account for a possible agreement being reached.

Bolstering the plan is a forecast that the economy will return to normal next year after the unprecedented spending tied to the pandemic and inflation. The budget forecasts 4.7% inflation this year and 2.3% in 2023, which would be down from 7% in 2021. Yet prices kept climbing in the first two months of 2022, and Russia’s invasion of Ukraine pushed oil, gasoline and natural gas prices higher in ways that could spread across the economy.

Cecilia Rouse, chair of the White House Council of Economic Advisers, said the administration expects “the economy to normalize” as the country works through waves of the pandemic, supply chain pressures ease and the “extraordinary measures” of support tied to the coronavirus roll off the budget. That normalization would imply inflation falling back to its more typical levels, “but there’s tremendous uncertainty,” Rouse said.

The Associated Press contributed to this report.