(Bloomberg Opinion) — President Joe Biden’s tax proposals are an opening bid in what will likely be a protracted negotiation with Congress. It’s too soon to guess what the outcome will be.
(Bloomberg Opinion) — President Joe Biden’s tax proposals are an opening bid in what will likely be a protracted negotiation with Congress. It’s too soon to guess what the outcome will be. But as these talks proceed, lawmakers need to pay closer attention to the way the administration’s ideas hang together. Changes to the tax code can’t be properly assessed item by item. What counts is the combined effect. This makes Biden’s approach of separate revenue-raising proposals, each tied to a particular spending plan, unwise. It would be better to discuss a single, comprehensive tax-reform package — all the more so because Biden’s ideas, taken together, aren’t mere tweaks to the code. They amount to something much more radical. The president intends to pay for his $2.3 trillion American Jobs Plan and his $1.8 trillion American Families Plan mostly with taxes rather than additional borrowing, and he aims to collect the revenue from the highest-income households. His proposals to date include raising the top rate on employment income from 37% to 39.6%; the top rate on investment income (applied to earnings exceeding $1 million) from 23.8% to 43.4%; and the tax on corporate profits from 21% to 28%. Biden also calls for a new treatment of capital gains that would make the higher rate on investment income much harder to avoid. Under current law, tax doesn’t apply to unrealized gains when the owner dies; the assets pass to heirs with their value, or “basis,” stepped up to current prices.
