Biden budget would cut deficit by $3 trillion over next decade with 25% minimum tax on richest Americans

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President Joe Biden released his budget on Thursday, vowing to cut $3 trillion from the federal deficit over the next decade, in part, by levying a 25% minimum tax on the wealthiest Americans.

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Biden also raises more revenue by increasing taxes on oil and gas companies, hiking the corporate tax rate to 28%, up from 21% imposed under former President Donald Trump but below the 35% tax pre-2017, and allowing Medicare to negotiate drug prices.

With Biden likely to run for re-election in 2024, his budget is also a preview into his platform as a candidate and campaign pitch in the year ahead. Facing a Republican-controlled House, it’s unlikely many of the proposals will be passed in their current form. The president submits his budget to Congress outlining the administration’s priorities for the upcoming year, but ultimately Congress decides where the funds are allocated.

White House Office of Management and Budget Director Shalanda Young told reporters the administration is able to cut deficit spending “by asking the wealthy and big corporations to begin to pay their fair share and by cutting wasteful spending on big pharma, big oil and other special interests.”

“It does this in part by reforming our tax code to reward work, not wealth, including by ensuring that no billionaire pays a lower tax rate than a teacher or firefighter and by quadrupling the tax rate on corporate stock buybacks,” Young said. “That’s a very clear contrast with Congressional Republicans.”

The Stock Buybacks Tax builds upon a measure Biden signed into law last year reducing the differential treatment in the code between buybacks and dividends. The goal is to encourage business to invest in growth rather than spending on stock buybacks. Under Biden’s budget proposal, the tax would quadruple from 1% to 4%. A Data for Progress poll from February found 58% of Americans support increasing the stock buyback tax.

Biden’s fiscal year 2024 budget gets some help from the slowing Covid-19 pandemic, which the White House noted needs less emergency aid as the outbreak enters a new phase thanks to widespread vaccinations. The president’s spending priorities include increasing funding for early childhood education and child care, expanding the $35 cap on insulin prices to all Americans, and expanding free community college. These proposals are all part of his push to give American families “a little more breathing room.” The 2024 fiscal year begins Oct. 1 and runs through Sept. 30, 2024.

Cecilia Rouse, chair of the Council of Economic Advisers, explained how the administration believes the social programs outlined in Biden’s budget are actually economic boosters.

“Policies such as paid leave and child care will bring more workers into the labor force and improve productivity,” Rouse said. “Investments in early education, mental health, and community college not only expand our economy’s productive capacity, but pay dividends for generations to come.”

In addition to social spending, the budget includes robust defense funding. At more than $835 billion, the defense budget would be among the largest peacetime expenditures in U.S. history.

For weeks Biden has urged House Republicans to present their own budget plan instead of just criticizing his. House Republicans have promised to propose a balanced budget and have scoffed when the White House pointed to Republican proposals to make cuts to programs like Social Security and Medicare. House Budget Chairman Jodey Arrington told CNN on Wednesday the GOP budget should be ready by the second week in May.

The White House, in its budget proposal, includes an entire section dedicated to shoring up Social Security and Medicare, funded by the minimum 25% wealth tax on households with a net worth of $100 million or more. The proposed budget would extend “the solvency of the Medicare Trust Fund by at least 25 years” without removing benefits or raising costs. It also provides a $1.4 billion increase in funding for Social Security to improve services.

“Benefit cuts are not on the table,” Young said.

Looming over the budget release is the unresolved standoff over whether to lift the debt ceiling. The White House has maintained it will not negotiate over the debt limit and Congress should do so as it has done numerous times over past decades. House Republicans, led by Speaker Kevin McCarthy, have tried to tie the debt ceiling to future spending, saying they will not lift it without promises to cut expenses. The debt ceiling, however, pertains to existing spending. House Republicans have been murky on what expenses they would like to see cut.

Preempting Republican concerns, Rouse stressed the ways the Biden White House has repeatedly bucked economic expectations.

“I think if you told most conventional macroeconomists last June that we were about to get seven straight months of declining annual CPI inflation, they would have told us that the unemployment rate would rise over that time, but instead the unemployment rate in January was 3.4%, or 0.2 percentage points lower than it was,” Rouse said, noting that February’s unemployment rate will be released Friday. “The economy looks healthier today than it did in other ways too.”

Rouse expanded on that, tampering down recession concerns by pointing to economic gains already seen under the Biden administration.

“The strength of our recovery has put us on solid ground to weather economic shocks,” Rouse said. “Americans are back to work and the economy is stronger than anyone, including the federal government and private forecasters imagined it would be when President Biden took office.”