The Tax Hikes Tucked Into Biden’s Covid Relief Plan

By Yuval Rosenberg

Biden Plans a Blitz to Sell His Stimulus

President Joe Biden signed a sweeping economic package into law
Thursday, a day earlier than originally planned and just a few
hours before addressing the nation to promote the massive relief
effort.

The signing of Biden’s first legislative victory came exactly
one year after the World Health Organization declared the Covid-19
outbreak a pandemic. The bill, passed without any Republican
support in Congress, adds another $1.9 trillion to the federal
response to the coronavirus crisis, pushing total spending to
roughly $5.5 trillion over the last 12 months.

White House Chief of Staff Ron Klain said the signing was done
ahead of schedule in order “to move as fast as possible,” and the
new law would be celebrated at the White House with congressional
leaders on Friday.

Relief payments of up to $1,400 per person could start flowing
within a few days, Press Secretary Jen Psaki said, with direct
deposits arriving as soon as this weekend and continuing for the
“next several weeks.”

Selling the package: The White House is confident
that the bill will continue to be popular. “You don’t
actually need to go sell this bill,” White House adviser Anita Dunn

told The Washington Post. “It’s one of the few
bills that has become more popular as it moved through Congress,
not less. We don’t need to convince people that Americans need
help; we need to tell them how they can get that help.”

Still, Biden plans to spend the next few weeks
promoting the relief package to the American people. As part of
that effort, the White House unveiled a new
website to celebrate the legislation and to help people
learn about the benefits it provides.

The president will hit the road next week, traveling to
Pennsylvania on Tuesday and then to Georgia on Friday, where he
will be joined by Vice President Kamala Harris. The vice president
will travel on her own earlier in the week, stopping in California,
Colorado and Nevada as part of the public relations campaign. The
White House also plans to have administration officials, mayors and
governors appear on local TV all over the country to talk up the
relief plan, Reuters
reported.

The promotional effort is driven in part by memories of the
Great Recession in 2009, when President Obama spent little time
selling his roughly $800 billion stimulus program to the American
people. Biden officials see that lack of public relations as a
mistake, one that helped Republicans take back the House the
following year.

“We didn’t do enough to explain to the American people what the
benefits were” back in 2009, Psaki said Wednesday.

A different era? Presidential historian Thomas Alan
Schwartz told Reuters that the bill’s popularity could help
Democrats avoid the fate of losing seats in Congress in the
mid-terms following a presidential victory. “I think it could lead
to a very positive aura to the presidency and to this sense that
it’s ‘morning again in America,’” he said.

Republicans signaled their negative communications
strategy on the legislation this week, downplaying its
effectiveness while portraying as a leftist threat. “Democrats
inherited a turning tide,” Senate Minority Leader Mitch McConnell
(R-KY) said Tuesday. “The vaccine trends and economic trends were
in place before this bill was ever voted on, before this president
was sworn in. But they’re determined to push to the front of the
parade with this effort to push America to the left.”

The Tax Hikes Tucked Into Biden’s Covid Relief Plan

Democrats inserted three tax hikes on the wealthy and large
corporations into their $1.9 trillion Covid rescue plan. Together,
the three increases are projected to raise $60 billion, Politico’s
Brian Faler
writes:

“One takes away deductions for publicly traded companies that
pay top employees more than $1 million. Another provision cracks
down on how multinational corporations do their taxes. A third
targets how owners of unincorporated businesses account for their
losses. …
“The tax increases Democrats picked to help keep their plan’s
cost in check had the political benefit of being arcane. Unlike
things like raising the corporate tax rate or upping the top
marginal tax rate on the rich, the ones they chose won’t produce
many headlines.”

Tax breaks for individuals: Of course, as we noted

earlier this week, the Biden plan includes a host
of tax benefits as well — including direct payments of up to $1,400
per person and an expansion of the Child Tax Credit and Earned
Income Tax Credit. Congress’s Joint Committee on Taxation estimates
that the plan will cut taxes by about $467 billion in 2021 and
about $590 billion over 10 years.

In all, the Biden relief plan will reduce federal taxes in 2021
by more than $3,300 and raise after-tax incomes by 4.1%, according
to an
updated analysis released Thursday by the
Urban-Brookings Tax Policy Center. That’s about double the average
first-year tax cut under the 2017 Trump tax law.

The income-boosting effects of the Biden cuts are heavily tilted
toward lower-earning households. Households making $91,000 or less
will get nearly 70% of the tax benefits, the Tax Policy Center
said, and after-tax income for the bottom 20% of earners —
households making $25,000 a year or less — will rise by more than
21% on average. By contrast, low- and middle-income households
received about 17% of the 2017 law’s tax benefits, and low-income
households got a 0.4% tax cut on average.

Rejecting Reaganomics: Combined, Biden’ tax cuts for
individuals and tax hikes for businesses highlight Biden and
Democrats’ focus on fighting inequality — and signal a
sharp break from both Trump’s economic approach
and that of Ronald Reagan. “Biden is basically pulling a George
Costanza on Reagan with this bill: Do the opposite of Reaganomics,”
NBC News’s Sahil Kapur
tweeted Wednessday night. “Instead of easing burdens for
upper earners and counting on that to deliver broad benefits, he’s
sending cash to low-income people and counting on them to boost the
economy.”

The challenge ahead: The tax cuts in Biden’s plan are
either one-off provisions, like the latest round of direct
payments, or set to expire at the end of the year, unlike the
individual income tax cuts in the 2017 GOP law, which were set to
expire after 2025. Democrats have made clear that they want to make
permanent key elements, like the expanded child credit. And Biden
is already planning a multi-trillion-dollar infrastructure
bill.

“[T]he real test for Democrats — who promised stiff tax
increases on the rich during last year’s campaign — will come
later, when they face demands to pay for something big like Biden’s
plans for a major infrastructure package,” Faler writes.

Those demands have already started. Some centrists are
expressing growing unease about adding trillions more to the
federal debt, and say they want to make sure that additional
spending is paid for one way or another.

“At some point we’ve got to start paying for things,” Sen. Angus
King (I-ME), who caucuses with the Democrats, said this week. “It’s
got to be paid for. It’s just a question of who pays. Are we going
to pay or our kids going to pay?”

Sen. John Tester (D-MT) also said that he wants at least some of
any new spending to be paid for, with the costs covered by a
potential mix of spending cuts and tax increases. “You’re going to
remind me of this [later] when none of it’s paid for,” he joked
with Politico’s Sarah Ferris and Burgess Everett, “but I do think
some of it needs to be paid for.”

House Budget Chair John Yarmuth (D-KY) told Ferris and Everett
that while he assumed an infrastructure package would include some
means of paying for new spending, the sheer size of the eventual
bill – estimates start at $2 trillion and move up to twice that –
would make it impossible to pay for it all. “I think that’s
unrealistic, given what everyone assumes the size of this is going
to be,” Yarmuth said.

At the same time, any tax increases that could be proposed to
help pay for those future plans could meet with intense
resistance.

Still, it’s clear where Biden and Democrats are likely to turn
for more revenue, based on the changes in the relief plan. “Clearly
it’s a signal that Democrats will look to high-income people and
large corporations for revenue for the investment package to come,”
Seth Hanlon, a senior fellow at the liberal Center for American
Progress, told Politico.

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