As Democrats struggle to pass their massive $3.5 trillion spending bill, many are criticizing the bill’s radical components. In addition to expanding the federal welfare system, imposing new extreme climate policies, and further expanding the increasingly politicized IRS, the bill would raise taxes on millions of Americans in order to pay for hundreds of billions in new spending.
Biden and his administration proposed their initial extreme tax hikes on April 28, 2021. The hikes include raising the top corporate income tax rate to 28% from 21%, doubling the long-term capital gains tax rate to 43.4% from 20%, and raising the top individual tax rate to 39.6% from 37%. Biden’s proposals would grow total federal tax revenues by approximately $3.6 trillion over the next ten years, making his proposed tax hike the largest nominal tax increase in American history and the largest percentage tax increase since 1968.
These tax increases would be detrimental to virtually all Americans. According to an estimate from the Tax Foundation, Biden’s proposals would decrease America’s GDP by 0.9%, decrease average wages by 0.8%, and eliminate at least 165,000 full-time jobs. This means that Biden’s tax hike would further setback his already lagging economy. In August, the U.S. economy added just 235,000 jobs instead of the forecasted 720,000, a miss of almost 500,000 jobs. Some industries, such as the retail and restaurant industries, lost 29,000 jobs and 42,000 jobs, respectively. According to the Bureau of Labor Statistics, there are currently 8.38 million Americans considered unemployed. Comparatively, there are estimated to be approximately 10.9 million job openings currently available in the U.S. This means that all or nearly all currently unemployed Americans could get a job but are simply choosing not to. This is likely due to the very welfare state that Biden and his Democrat allies are seeking to rapidly expand. This is a recipe for economic disaster.
As a result of the pushback received from Biden’s proposed tax hikes, House Democrats have released a slightly scaled-back version of tax increases. The most recent House Democrat proposal includes $2.1 trillion in tax increases through the next ten years, compared to Biden’s proposed $3.6 trillion in tax increases over the next ten years. Just as Biden initially proposed, the House Democrat proposal would raise the top individual income tax rate to 39.6% from 37%. However, the recent proposals from Congressional Democrats would also raise the top corporate income tax rate to 26.5% compared to Biden’s proposed 28%, raise the tax rate on long-term capital gains to 25% compared to Biden’s proposed 43.4%, create a new 3% surtax on income in excess of $5 million, double the federal excise tax on cigarettes to $2 per pack from $1.01 per pack, and would force drug manufacturers to comply with new artificial price controls by threatening them with an excise tax as high 1,900%. According to the Congressional Budget Office (CBO), the proposed drug price controls will block between 8 and 15 potentially life-saving drugs from being introduced into the market over the next ten years.
The House Means and Ways Committee approved the trimmed version of increased taxes on September 15, 2021, and the House Budget Committee passed the $3.5 trillion bill that is deceptively titled “The Build Back Better Act” on September 25, 2021. The bill now awaits a vote on the floor of the House of Representatives.
The negative economic effects of the Build Back Better Act would be even more severe than Biden’s initial proposals. According to a recent study conducted by the Texas Public Policy Foundation, the Build Back Better Act would kill a whopping 5.3 million jobs over the next ten years, reduce America’s GDP by $3.7 trillion over ten years, and reduce the income of Americans by $1.2 trillion throughout the next ten years.
In addition to crippling America’s economy, the tax increases proposed by Biden and Democrats in Congress violate one of Biden’s top pledges. Prior to the 2020 presidential election and after taking office, Biden and his administration have promised not to raise taxes on anyone earning less than $400,000 per year. To quote Biden back in October of 2020, “Let me be very clear: If you make under $400,000 you won’t pay a penny more in taxes under my administration.” White House press secretary Jen Psaki continued to promote Biden’s promise back in March when she said, “The President remains committed to his pledge from the campaign that nobody making under $400,000 a year will have their taxes increased.” Most recently, Biden repeated the promise back in May when he claimed, “Nobody making under 400,000 bucks would have their taxes raised, period, bingo.” However, Biden’s plan would do exactly what he pledged not to do by raising taxes on millions of low or middle-income earners.
First, the increase in cigarette excise taxes to $2 per pack from $1.01 will disproportionately impact low-income-earning Americans. According to the CDC, nearly 60% of American smokers earn less than $25,760 per year. Since approximately 34 million Americans currently smoke cigarettes, this means that at least 20 million low-income Americans will immediately be impacted by the proposed tax increase, a clear violation of Biden’s pledge. Additionally, the corporate income tax increases proposed by Biden and Congressional Democrats would negatively impact up to 1.4 million small businesses. Since the majority of small businesses have less than $400,000 in annual revenue, hundreds of thousands of small businesses operating as C-corps and many small business owners that earn less than $400,000 each year will face higher tax rates, another apparent infringement of Biden’s promise.
The Democrat Party is currently in shambles as factions within the party continue to promote their own forms of tax increases. Due to opposition to corporate and individual tax increases from Senators Joe Manchin and Kyrsten Sinema, Democrats are now resurrecting their efforts to tax greenhouse gas emissions in the U.S., as well as tax imports based on environmental regulations in the country of production. This comes as Democrats in Congress struggle to come to a consensus and scramble to pass their agenda. It should be noted that a tax on greenhouse gas emissions or a tariff on imports based on environmental regulations in the country of production would also likely violate Biden’s pledge to not raise taxes on anyone making less than $400,000 annually.
Despite what Biden previously promised, Biden and Congressional Democrats intend to raise taxes on millions of Americans earning less than $400,000 per year. The solution to Biden’s radical proposals is not a scaled-back version of tax increases that will further slow the economy. In fact, Americans do not need or want any increased taxes at all. Instead, Americans want and deserve lower overall taxes and lower overall costs of living. Biden and his Democrat allies either do not understand this or simply do not care.