Biden's Budget Calls for Trump Tax Cuts to Expire, Imposes 'Wealth Tax' with Questionable Constitutionality
President Joe Biden’s 2023 budget plan, introduced Monday, calls for allowing the Trump tax cuts to expire.
Additionally, the proposal would raise taxes on corporations and impose a 20 percent wealth tax, which some policy experts say is unconstitutional.
In December 2017, then-President Donald Trump signed into law the Republican-backed Tax Cuts and Jobs Act.
The legislation lowered the tax rates across the board and nearly doubled the standard deduction, and it doubled the child tax credit from $1,000 to $2,000.
The Biden plan would retain an enhanced child tax credit and reinstitute the monthly payments of up to $300 per child, first employed in 2021 as part of the Democrats’ American Rescue Plan Act. The enhanced credits ended in December.
Shalanda Young: “You heard @POTUS in the SOTU – that he continues to believe that the #ChildTaxCredit should be extended. You’re absolutely right, it brought down the child poverty rate, the President from his own lips is recommitted to supporting that effort.” pic.twitter.com/xLPbqpJyZE
— Economic Security Project (@EconomicSecProj) March 30, 2022
Additionally, the Tax Cuts and Jobs Act took the corporate income tax rate down from 35 percent — the highest in the industrialized world — to 21 percent, which is about average.
The president would move the rate back up to 28 percent, which when combined with state corporate taxes would again make American businesses among the highest taxed in the world.
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Regarding individual tax payers, Biden promised under his plan no one earning under $400,000 “will pay a penny more in federal taxes.”
However, during testimony before the House Budget Committee on Tuesday, White House Office of Management and Budget Director Shalanda Young confirmed Biden’s plan calls for the Trump tax cuts to expire.
“So by expiration of the Tax Cuts and Jobs Act, that is going to raise taxes on every average-day American by $2,000 a year, and those are people making less than $100,000 a year, so in fact this budget does that,” Rep. Jason Smith of Missouri responded, who is the ranking Republican member on the committee.
Richard Stern — a federal budget policy expert with The Heritage Foundation — told The Western Journal in an emailed statement that “Biden’s tax plan would fall squarely on the backs of hard-working American families.”
“Make no mistake, these tax hikes would directly result in lower wages, higher consumer prices and reduced job opportunities for generations to come,” he said.
A poll conducted by Rasmussen in January found that 57 percent of voters favor making the Trump tax cuts permanent, while 24 percent oppose the move and 19 percent are not sure.
The survey was conducted among 1,000 registered voters with a margin of error of +/- 3.1 percent.
Democratic Sen. Joe Manchin of West Virginia has come out against Biden’s proposed wealth tax.
It involves taxing the unrealized gain (i.e. the value on paper, but not in people’s bank accounts) on investments and other holdings, for households worth more than $100 million.
“You can’t tax something that’s not earned. Earned income is what we’re based on,” he told The Hill.
“Everybody has to pay their fair share, that’s for sure. But unrealized gains is not the way to do it, as far as I’m concerned,” Manchin added.
.@POTUS: “My budget contains a billionaire minimum tax at 20% that applies only to the top 1/100th of one percent, 1/100th of one percent of Americans will pay this tax. The billionaire minimum tax is fair and raises $360 billion to cut the deficit.” https://t.co/hd2aYoufmF pic.twitter.com/gWAdP4fcVJ
— The Hill (@thehill) March 28, 2022
GianCarlo Canaparo — legal fellow with The Heritage Foundation — believes the wealth tax is unconstitutional.
“[T]he Constitution forbids Congress from levying any direct tax unless it is apportioned among the states in proportion to the population. A direct tax is a tax on property (which includes money), or the income derived from property, which cannot be shifted onto someone else,” he wrote.
“An income tax is the obvious example, and indeed, income taxes were held unconstitutional until we ratified the 16th Amendment,” Canaparo continued.
“Likewise, a tax on unrealized capital gains would be a direct tax. The 16th Amendment would not save such a tax, however, because it covers only ‘taxes on incomes.'”
The Wall Street Journal editorial board concurred, writing, “The Sixteenth Amendment lets Congress tax income, but unrealized capital gains aren’t income any more than unvested stock options are.”
The provision would likely require many to sell assets in order to pay their tax bill.
Steven M. Rosenthal, a senior fellow at the Tax Policy Center, told The New York Times, Biden’s proposed tax would be constitutionally “suspect,” and not likely to pass muster if it comes before the Supreme Court.
