Following the already controversial whopping $1.9 trillion COVID-19 stimulus bill, Joe Biden is reportedly planning the first major federal tax hike in nearly 30 years to fund his new economic program.
The next initiative, which is expected to be even bigger and could cost up to $4 trillion, won’t just rely on government debt as a funding source. Instead, taxpayers will take much of the brunt.
The planned increases reportedly include: raising the corporate tax from 21 percent to 28 percent, increasing the income tax rate on people making more than $400,000, expanding the estate tax, paring back tax preferences on pass-through businesses such as limited-liability companies and setting up a higher capital gains tax rate for individuals making at least $1 million, The Hill reports.
This plan, as noted by Bloomberg, would raise around $2.1 trillion over the next 10 years.
But, this doesn’t come as a surprise.
Biden said during his campaign that he would repeal Trump’s tax cuts on day one of his administration. Though, his main priority thus far has been fueling the crisis at the border.
Economist Lawrence Summers, who previously served as undersecretary in the Treasury Department, warned that Biden’s coronavirus stimulus package could cause a serious inflation boom, adding that Biden’s stimulus “is three times as large as the projected shortfall” and “relative to the size of the gap being addressed, it is six times as large,” per the Daily Wire.
“Given the commitments the Fed has made, administration officials’ dismissal of even the possibility of inflation, and the difficulties in mobilizing congressional support for tax increases or spending cuts, there is the risk of inflation expectations rising sharply,” Summers wrote. “Stimulus measures of the magnitude contemplated are steps into the unknown. For credibility, they need to be accompanied by clear statements that the consequences will be monitored closely, and if necessary, there will be the capacity and will to adjust policy quickly.”
Jim Bianco, president of Bianco Research warned that there is a serious threat of inflation that would damage the economy and stock market.
“If we get to 2.6 percent or 2.7 percent on the core [inflation] number, that’s the highest level we would have in 30 years,” he said. “That’s going to be a problem for risk markets to see that kind of level of inflation even if the Fed says that they want that level of inflation.”
Any tax increases that are passed would likely take effect in 2022. Some lawmakers, including democrats, have urged the Biden administration to hold off on any increases as unemployment remains too high.
One anonymous democrat in the House told The Hill in February that the government should not be raising taxes.
“People would accept the corporate tax raised a few points but beyond that you’re going to have problems, especially in the middle of an economic crisis,” the lawmaker said.