Will Joe Biden Raise Taxes?
How Biden’s History of Compromises Stand in the Way of His Tax Policies
Election season is over, it’s now time to size up political promises to reality. Biden has won the presidency, along with it, he inherited the pandemic — and years of potential economic upheaval stringing behind it.
Winning the presidential race is the beginning of the long and winding road to economic recovery which Biden wants to start with a new tax policy. This means, taxing the wealthy and giving back to the middle and lower class. These are some big promises, but will they materialize?
History lessons
While Biden’s Campaign boasted the slogan “The Battle for the Soul of the Nation”, suggesting a decisive and aggressive candidate, history has shown that the decisive and aggressive candidate is a softie for compromises. Biden grew-up having been taught the art of sales talk and is familiar with old-school negotiation. This character of his has made him the Star Dealmaker in the Obama Administration.
Biden’s political negotiating skills will be of most use as he must bridge a divided Congress during his presidency. History shows that in a tough spot, Biden will more likely compromise to reach an agreement. This is reflected in two deals in the past when Biden came into The Room Where it Happens and came out with less than what was expected.
In 2010, Biden played a pivotal role in reaching a deal with a Republican Congress, during a time when Bush tax cuts were expiring. What the Obama administration wanted was for the tax cuts to be extended only for taxpayers earning less than $250,000 annually. A bill was passed in the Democrat-led majority of the lower house, but Republicans blocked the same in the Senate. They were in an impasse. And it was Joe Biden who brokered a deal that which ultimately gave the Republicans what they wanted, a two-year extension of all the tax cuts.
In return, this deal allowed Obama to prevent the expiration of the tax cuts which was badly needed for the fragile economy coming out of the 2008 recession. This also gave way to a $300 billion economic stimulus; a one-year, 2 percentage point cut in the Social Security payroll tax; and an extension of unemployment benefits. In those years, Obama states, “We’ve got to make sure we’re coming up with a solution, even if it’s not 100 percent of what I want or what the Republicans want.”
Another tax deal in 2012, when the same Bush tax cuts were once again expiring, was made. This time what the Democrats wanted was to wait for it to reach its natural death and instead impose their own tax cuts in 2013. In that deal, once again, the entire Bush tax cuts were extended. Instead of extending only for an annual income of $250,000 or less, Biden agreed to set the figure at $450,000 annually.
These events substantiate the claim that Biden has a history of being very accommodating. While it is fair to point out that Biden was working under the request of Obama, in today’s socio-political environment, this nature of his could create problems for his policies. Will he stand with his platform or will he end up settling as he has done I the past?
The Democratic left is calling Biden out to be an ideological warrior, asking him not to settle for compromises, claiming that economic recovery can only be achieved by making though decisions and taking a stand. This sentiment is faced with the inevitable obstacle that is U.S. politics. By the end of the day, his policies stand to be tested by the realities surrounding the political arena of America.
Attaining Senate Majority
“We don’t need a Tax Code that rewards wealth more than it rewards work”, Biden said in his campaign last August 2020. The driving force of his campaign involved a tax reform which he now has to present to Congress. The problem is, Biden now faces the brutal task of uniting a divided Congress.
The Democrats have House Majority, but in order to make any significant legislative changes, they have to somehow win the Senate. It’s simple, right now, they don’t have the numbers in Senate to pass a new tax reform when former President Trump’s policies are only set to expire in 2025. In order to get the majority, they need 2 more seats and they are pinning their hopes on the run-off elections to be conducted in Georgia this January to get them.
With how things are, Biden is tiptoeing on a tightrope balancing a pole with one side: the expectations of the Democratic Party, and on the other: the resentment of defeated Republicans.
Considering the Pandemic
That’s just the tip of the iceberg. Even if they do get floor majority, they will need to make a decision whether or not to implement the new policy in the wake of the pandemic, while these businesses are suffering from heavy losses and struggling to recover financial stability; or wait until the economy is more stable. There are 2 points in this argument why the pandemic is one driving force why the President-elect’s tax reforms could be shelved.
The reality of segregating tax for the wealthy
More than 98% of households are below the $400,000 threshold of the Biden Policy. In theory, Biden’s tax increase won’t be affecting the average American. One of the most dominant changes will be the increase in Corporate Taxes from 21% to 28%. This will encourage tax revenue generation to counter the cost it will take to revive the economy. However, the reality of things could need a different solution.
Corporate taxes don’t just affect the corporations, one way or another, these changes will trickle down to the middle class. If you are making $150,000 and you have a 401K which includes corporate investments, they will be affected by the increase in corporate tax. Higher tax means lower returns for your investments. Thus, the impact of higher taxes on the wealthy won’t be isolated in the upper class.
Although the effects won’t be direct, it will still be felt. In a time when the priority is to put money in its citizens’ pockets, it’s difficult to convince the people and consequentially garner the votes in Congress to pass a tax proposal that increases taxes, which essentially takes money.
Prioritizing making money
During this economic decline caused by the pandemic, the government needs to ensure the average person is making enough money — or at least the government should try and not take money from the people. With unemployment rates on the high, it is easier to pass a proposal that will put money into the people’s pockets, rather than take them out. That means implementing tax cuts for the middle and lower class could easily be negotiated in Congress. This proposal could pass as part of the Coronavirus drive.
However, the increase in corporate tax is another story. To increase taxes at a time when these businesses are also struggling to stay afloat will not sit as well with Congress.
Dealing with the now
As things are with deals, they will take time. While waiting for all the pieces to fall into place, Biden could use his regulatory powers to give a better interpretation of the laws already implemented while anticipating for the deal to be struck.
Considering the history behind Biden’s deal-making and the socio-economic landscape of the present, it’s less likely that the changes in policies will be as audacious as his platform suggested. Nevertheless, a new administration will always mean new changes, and we will be here to keep you in the now.
