Biden Says He’s Willing to Compromise on Major Tax Hike

Biden Says He’s Willing to Compromise on Major Tax Hike

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Plus, who would be hit by Biden's capital gains tax hike
Wednesday, May 5, 2021

Biden Says He’s Willing to Compromise on Major Tax Hike

Claiming that President Joe Biden is trying to turn the U.S. into "a socialist country," Senate Minority Leader Mitch McConnell (R-KY) said Wednesday that he aims to prevent the new president from achieving his goals.

"One hundred percent of my focus is on stopping this new administration," McConnell told reporters at a press conference in Kentucky. "I think the best way to look at what this new administration is: The president may have won the nomination, but Bernie Sanders won the argument about what the new administration should be like."

McConnell’s comments drew comparisons to his statement in 2010 that the "single most important thing we want to achieve is for President Obama to be a one-term president," while underlining doubts that Republicans are interested in working with the White House in a constructive, bipartisan manner.

Asked about McConnell’s comments, Biden said he thinks there’s still room to work with the Republican leader. "Look, he said that in our last administration ... he was going to stop everything – and I was able to get a lot done with him," Biden told reporters in Washington.

White House Press Secretary Jen Psaki also addressed McConnell’s comments, saying that while the Biden administration wants to "work with the Republicans," the administration is focused on Covid relief and the economy, not political conflict. "I guess the contrast for people to consider is 100 percent of our focus is on delivering relief for the American people," she said.

Biden says he wants to pay for his plans: After downplaying McConnell’s comments, Biden told reporters that he plans to meet with GOP lawmakers led by West Virginia Sen. Shelley Moore Capito in the coming days. "I'm going to meet the Republicans next week when they get back in," Biden said, adding that he still thinks there’s room for compromise on his proposals.

Biden made clear that, while he is willing to compromise on the issues like the corporate tax rate, which he wants to increase to 28%, he is focused on passing legislation that will increase growth while not increasing the deficit.

"My Republican friends had no problem in voting to pass a tax proposal that expires in 2025 that cost $2 trillion, none of it paid for, increased the deficit by $2 trillion, gave the overwhelming percentage of those tax breaks to people who didn't need it, the top one tenth of 1%," Biden said. "And it was argued that what it would do is generate this great economic surge in growth, it would increase productivity, it would pay for itself ... Well, everyone from the Heritage Foundation on has pointed out it hasn't done that."

Biden emphasized that he wants to pay for his proposals. "I’m not willing to deficit spend," he said. "They already have us two trillion in the hole. Again, look – everything I'm proposing that be done to generate economic growth, employment, and put us in a position where we can out-compete any other country in the world with research and development, and moving ahead: I pay for it."

Few Americans Would Be Affected by Biden’s Capital Gains Tax Hike: Report

President Biden’s proposed increase in the capital gains tax rate would take a big bite out of total capital gains in the U.S., but affect just a small fraction of the population, according to an analysis by the Tax Policy Center.

Biden wants to roughly double the capital gains tax rate, but only for households earning more than $1 million a year. Those high-income taxpayers would see a significant increase in their capital gains tax rates, to 43.4%, up from the current 23.8%.

In 2018, only 2.7% of tax returns that reported capital gains also had adjusted gross incomes of more than $1 million, the Tax Policy Center’s Robert McClelland says. But those returns — which came from just 0.3% of all households — accounted for 62% of all capital gains.

"A small amount of people are going to end up paying it, but it could potentially affect a lot of the capital gains," McClelland told The Wall Street Journal.

Treasury Sends Warning on Debt Limit

The debt limit is suspended through July, but another showdown over raising it this summer could prove even more perilous than usual: The Treasury Department said Wednesday that it is "very difficult" to predict how long it may be able to avoid defaulting on the debt by using the "extraordinary measures" it usually employs to continue paying the government’s bills without borrowing more.

"In light of the substantial COVID-related uncertainty about receipts and outlays in the coming months, it is very difficult to predict how long extraordinary measures might last," Brian Smith, Treasury’s deputy assistant secretary for federal finance, said Wednesday. "Treasury is evaluating a range of potential scenarios, including some in which extraordinary measures could be exhausted much more quickly than in prior debt limit episodes."

The extraordinary measures used by the department have typically lasted several months, The Wall Street Journal notes. Nancy Vanden Houten, a senior economist with Oxford Economics, told the Journal that, based on the Treasury Department’s projections for its cash balance at the end of July, the government may have until late October before it stops being able to cover its obligations. "However," she said, "there is more uncertainty than usual about outlays given the unpredictable timing of disbursements from Covid relief packages."

Why it matters:
No one wants the U.S. to default on its debt — experts have warned that it could spark a crisis in financial markets. But Senate Republicans last month agreed to a nonbinding rule that demands spending cuts in exchange for raising the debt ceiling. If Republicans insist on spending cuts to match any debt limit increase, we could face another round of brinksmanship similar to the painful showdown between President Obama and congressional Republicans in the summer of 2011. Lawmakers are also scheduled to leave for their summer recess at the end of July, meaning that they will face pressure to resolve the debt ceiling issue before they depart.

Numbers of the Day

186,200: President Biden touted the newly launched Restaurant Revitalization Fund Wednesday, saying that the $28.6 billion program has seen a "staggering" number of applications since it started accepting them on Monday. The fund, which was established as part of the $1.9 trillion Covid relief plan that Biden signed into law in March, received 186,200 applications for aid in its first two days, Biden said.

Under the program, restaurants and bars can receive grants equal to their pandemic-related revenue loss, with a cap of $10 million per business and $5 million per location. Funds from the program can be used for payroll, rent, debt service and other costs related to the business. Grant recipients don’t have to repay the money as long as it is used for eligible purposes by March 11, 2023.

164 million: The Treasury Department said Wednesday that it was disbursing another 1.1 million Economic Impact Payments, the eighth batch under the American Rescue Plan enacted in March. That brings the total number of "stimulus check" payments so far to about 164 million, with a total value of approximately $386 billion.

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