How Much Biden’s 2024 Promises Could Cost You
Love them or hate them, President Joe Biden has made no secret of his spending priorities and plan if reelected. He outlined them in his 2025 budget proposal.
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Granted, you have to take all presidential budget proposals with a big ol’ grain of salt. They’re a wish list, a press opportunity to highlight an administration’s goals. But they don’t actually affect governance, as Congress passes budgets, not the White House.
Even so, presidents have plenty of power to persuade their own party leaders in Congress. In an era when Congress seems to pass few real law changes, presidents of both parties resort to executive orders to shift money and implement policy.
So what are the President’s priorities? How much will they cost? More importantly, how much will they cost you?
Summary of Biden’s Promises
For fiscal year 2025, the President proposes spending $7.3 trillion. It marks a 6.6% federal deficit, and he proposes borrowing $1.8 trillion to help pay for it.
President Biden’s proposals start with expanding the child tax credit from $2,000 to $3,000 per child six and above, and $3,600 for children under six. The tax credit would phase out for families with incomes over $112,500 ($150,000 for married couples).
Proposed changes also make the tax credit refundable. If a family doesn’t owe enough money in income taxes to receive the full amount in tax credits, the government would refund the difference to them in cash. In other words, it becomes a cash benefit to lower-income families.
Biden also proposes a new childcare spending program. It subsidizes childcare costs for families earning less than $200,000, aiming to cover all but $10 per day in childcare costs (and all costs for low-income families). He further wants a guaranteed annual 12 weeks’ paid family leave for illness and parenting.
From there, the President wants to spend hundreds of billions on housing initiatives. These include $258 billion to fund the building and renovation of homes, $10 billion in down payment aid, and two new tax credits for first-time homebuyers.
As for student loan forgiveness, the president has tried a handful of subsidies with mixed success. It’s unclear exactly what additional payouts he’ll end up promising younger voters to woo them, but expect more promises and attempts as his campaign ramps up.
The list goes on from there. You can read a summary of it on CNN.
How Biden Proposes Paying for Them
Much of the spending will come from borrowing and increasing the federal debt. In other words, our children and grandchildren can pay for them in the decades to come. It’s a tried and true strategy employed by politicians on both sides of the aisle.
Some of the spending comes from higher taxes however.
Raising Corporate Tax Rates
The Biden budget calls for raising the corporate tax from 21% to 28%.
It goes on to propose raising the corporate alternative minimum tax — first introduced by the Inflation Reduction Act — from 15% to 21%.
Other proposed changes get a little more esoteric. These include quadrupling the corporate stock buyback tax rate and restricting the deductibility of employee pay, among other measures.
Raising Personal Income Tax Rates
President Biden proposed raising the highest tax bracket back to 39.6%. That might not sound so worrying, given that few taxpayers actually fall in that tax bracket.
However the budget proposes to shift the current tax brackets, so that Americans currently falling in lower tax brackets find themselves in higher ones.
The proposed changes also require higher earners to pay those newly higher income tax rates on capital gains, not just regular income.
Biden wants to create a 25% minimum tax rate on ultra-wealthy individuals with a net worth over $100 million. But that opens a whole new can of worms, by requiring taxpayers to document and report their net worth. It opens the door to an annual wealth tax as the government looks for new and creative ways to tax citizens.
Biden’s proposal further restricts retirement contributions for higher earners. Read up on these and other ways a Biden win might impact your retirement.
Lower Estate & Gift Tax Exemptions
Currently, the lifetime estate tax exemption is $13.61 million per person (a combined $27.22 million for married couples).
President Biden proposes dropping that to $5 million per person. So, far more heirs would pay taxes on their inheritance.
Import Tariffs
The Biden Administration has already announced massive new rounds of tariffs on Chinese imports.
In addition to new tariffs on medical supplies, semiconductors, and solar panels, the plans quadruple the tariffs on Chinese electric vehicles from 25% to 100%. That effectively bans cheap Chinese electric cars.
The President hopes to garner support from labor unions with these protectionist policies. But the move also raises the cost of green adoptions like solar panels and electric vehicles, highlighting the rift between labor and green priorities among the Democratic base.
How These Tax Changes Affect You
These proposed Biden tax changes might affect you directly, of course. You could find yourself in a higher tax bracket, or paying full income tax rates on capital gains. Uncle Sam might carve out a hefty chunk of your inheritance, when before it would have fallen under the exemption limit.
But the challenge with tax changes is that even economists can’t agree on how they’ll impact the broader economy. As a general rule, higher tax rates suppress economic growth, because individuals and businesses have less money to spend and juice the economy. Businesses can’t grow or hire as quickly, if at all. That could mean fewer jobs available in your industry.
Of course, some of that can be offset by the government redistributing that wealth elsewhere in the economy. Again, how much help economic growth this spurs remains a point of contention.
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The Tax Foundation offers this summary of their calculations: “We estimate the tax changes in the president’s budget would reduce long-run GDP by 2.2 percent, the capital stock by 3.8 percent, wages by 1.6 percent, and employment by about 788,000 full-time equivalent jobs. The budget would decrease American incomes (as measured by gross national product, or GNP) by 1.9 percent in the long run, reflecting offsetting effects of increased taxes and reduced deficits, as debt reduction reduces interest payments to foreign owners of the national debt.”
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