President Biden finally released his budget on Thursday, more than a month after the Budget Act’s statutory deadline. The document should have come with a five-word warning attached: “Hold on to your wallet.”
The budget includes thousands of pages of arcana and technical details, all of which will come to light further in the coming days. But a preliminary review of the budget’s main summary tables illustrates a familiar pattern among Democrats — a tax, spend, and borrow vision designed to expand government further. Here are some of the “highlights” (more like lowlights) from the summary document.
Taxes Too Much
Overall, the administration says the budget proposes $4.7 trillion in tax increases — a staggering sum in any season, but particularly when the economy faces recession risks. Among the highest profile revenue hikes:
- $437 billion from “a minimum income tax on the wealthiest taxpayers”
- $493 billion from changes to the “global minimum tax regime”
- $238 billion from increasing the tax on stock buybacks
- $306 billion from applying Medicare taxes to pass-through income — a “loophole” that President Biden himself spent the past six years exploiting
- $344 billion from increasing the rate of said Medicare tax from 3.8 percent to 5 percent for those earning over $400,000
- $1.3 trillion from increasing the corporate tax rate from 21 percent to 28 percent
- $200 billion from other “reforms” to business taxation
- $549 billion from adopting the undertaxed profits rule regarding international taxes
- $66 billion from “reform[ing] taxation of foreign fossil fuel income”
- $37 billion from “modify[ing] energy taxes”
- $235 billion from increasing the top marginal rate for high-income earners
- $214 billion from higher taxes on capital gains
- $23 billion from higher taxes on the retirement plans of “high-income taxpayers”
- $77 billion from changes to estate and gift taxes
- $50 billion from “clos[ing] loopholes”
- $105 billion in revenue assumed by extending the IRS enforcement money included in last year’s Inflation (Reduction) Act. The proposal to extend and expand the IRS’ ability to audit and potentially harass taxpayers comes shortly after an analyst at the Tax Policy Center admitted that the Service let President Biden off the hook for failing to pay his own taxes.
Whatever anyone thinks about the merits of these individual proposals, they cumulatively would have a significant — and negative — impact on the economy. Taxing energy producers in particular would lead to less exploration and higher prices at the pump, at a time when American families are still suffering from high inflation.
These tax increases come with the added irony that Biden himself did not “pay his fair share” of Medicare taxes, according to numerous tax experts. On a budget preview call with reporters Thursday, Office of Management and Budget Director Shalanda Young refused to recognize Biden’s hypocrisy — but the American people will.
Spends Too Much
Where will all the budget’s new tax revenue go? In many cases, to more spending and an expansion of the welfare state. Among the proposals included are several from Biden’s failed Build Back Bankrupt agenda:
- $424 billion for child care
- $200 billion for “free, universal preschool”
- $236 billion for a permanent extension of Obamacare insurance subsidies to the wealthy
- $200 billion for a government-run health program in the states that have not expanded Medicaid to the able-bodied under Obamacare
- $96 billion to double the Pell Grant
- $90 billion for “free community college”
- $104 billion for housing subsidies
- $150 billion for home and community-based services in Medicaid
- $325 billion for “national, comprehensive paid family and medical leave”
- $429 billion for an expanded child tax credit. However, according to Treasury’s revenue explanations, the higher credit would apply for 2024 and 2025 only. In December 2021, the Congressional Budget Office estimated the 10-year cost of a permanent extension of this policy at $1.6 trillion, or almost four times the amount included in the budget.
- $156 billion for an expanded Earned Income Tax Credit
- $76 billion for behavioral health care
- $1 billion to “make permanent the income exclusion for forgiven student debt.” While this number seems like a comparatively small amount, in reality it would pave the way for a future administration to pass another massive giveaway in student “loan forgiveness,” without triggering federal income taxes on the amount of debt canceled.
Over and above the details of the specific proposals, the budget ignores the inescapable fact that subsidizing programs increases rather than decreases their costs. The proposals will encourage colleges, child care providers, insurance companies, and others to jack up their rates, knowing that the federal government will pay the difference. To put it another way, the budget’s spending will raise inflation, even as its tax increases will kill economic growth.
Borrows Too Much
Even with all the tax increases Biden has proposed, it still won’t begin to make up for the new spending he plans, and the cost of servicing the debt from Washington’s Covid spending binge the past several years. The budget also proves how the debt has worsened under this president:
- Table S-2 of the budget states that, if enacted in full, the budget would reduce 10-year deficits by $2.857 trillion. But last month, the Congressional Budget Office released its analysis of the 10-year budget, which showed that since last May, the projected 10-year deficit has increased by $3.082 trillion. In other words, even if all the Biden “deficit reduction” gets enacted, our nation will still be $200 billion worse off fiscally than it was just 10 short months ago.
- The budget as proposed would lead to deficits of at least $1.5 trillion in every year of the 10-year budget window. By the last year of the budget window, they would total $2 trillion — and rising.
- By the time President Biden intends to leave office in 2029 (assuming he gets reelected), interest on the debt will total over $1 trillion per year. By that point, we will be devoting more than 10 percent of the federal budget just to pay the interest on our debt.
- Deficits will remain near or above 5 percent of GDP for the foreseeable future — much faster than our economy can grow, meaning that debt will continue to rise and rise as far as the eye can see.
To say this budget ignores reality is putting it mildly. Here’s hoping lawmakers can finally restore some sanity to a perpetual Washington spending spree that has grown completely out of control.