Biden Pushes Tax Increase for the First Time in 28 Years... Opposition Voices Even Within US Democratic Party (Comprehensive)

First Comprehensive Tax Increase Review Since 1993
Most Additional Revenue Expected to Fund Green New Deal
Strong Opposition Within Democratic Party... "Absurd Act"

[Image source=EPA Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] As the Biden administration in the United States is reportedly planning a comprehensive tax increase plan for the first time in 28 years, controversy is expanding within the U.S. political sphere. While the Biden administration is expected to focus on a ‘wealth tax increase’ centered on raising corporate tax rates and high-income tax rates, there are strong opposing voices concerned about the deterioration of corporate competitiveness. Concerns about worsening fiscal soundness are also growing.

According to foreign media including Bloomberg on the 15th (local time), the Biden administration is reportedly pushing for a comprehensive tax increase plan including corporate tax and income tax. This is the first time in 28 years since the Clinton administration in 1993 that the U.S. government has pursued a comprehensive tax increase.

Bloomberg reported that President Biden is reviewing five major tax increase measures in line with the pledges he made during last year’s presidential campaign: △raising the corporate tax rate from the current 21% to 28% △raising the top individual tax rate for those earning over $400,000 (about 453 million KRW) from 37% to 39.6% △taxing income on capital gains over $1 million annually △raising the inheritance tax on inheritances over $1 million from 40% to 45% △reducing tax benefits for ‘pass-through entities’ that convert corporate tax to income tax.

The White House acknowledged that it is reviewing tax increase measures targeting high-income earners. White House Press Secretary Jen Psaki stated, "President Biden will not raise taxes on people earning less than $400,000 annually as promised," adding, "This is still under discussion with Congress and nothing has been finalized yet."

The tax increase is expected to generate additional tax revenue of $2 trillion to $4 trillion for the U.S. government. According to CNBC, the U.S. Tax Policy Center (TPC) estimates that if the tax increase plan is implemented, it could raise $2.1 trillion in tax revenue over the next 10 years. Some speculate that it could reach as high as $4 trillion.

The increased tax revenue is expected to be used as funding for infrastructure such as the Green New Deal. Global investment bank Goldman Sachs stated in a letter to investors that "the more than $2 trillion in funds generated through tax increases are likely to be invested in the Biden administration’s pledged green energy and infrastructure projects under the Green New Deal," and predicted that "specific tax increase plans will be unveiled at the joint session of Congress and President Biden scheduled for April."

However, since the Republican Party is concerned about the deterioration of corporate competitiveness due to the corporate tax increase, the approval process in Congress is expected to be challenging. Opposition within the Democratic Party is also significant. According to U.S. political media The Hill, Senator Joe Manchin, known as a leading moderate within the Democratic Party, called the tax increase push "ridiculous," and some Democratic lawmakers reportedly demanded a delay in the tax increase given the high unemployment rate.

Concerns about worsening fiscal soundness are also significant. The U.S. government’s fiscal deficit reached a record high of $572.9 billion in the fourth quarter of last year.

Meanwhile, the U.S. Treasury Department is reportedly discussing setting a corporate tax rate floor with member countries of the Organization for Economic Cooperation and Development (OECD) as a measure to minimize the deterioration of U.S. corporate competitiveness due to the corporate tax increase. The Washington Post (WP) reported that Treasury Secretary Janet Yellen is currently persuading representatives of various countries to reach an agreement on a corporate tax rate floor under the OECD tax treaty. WP added that the OECD is expected to propose a corporate tax rate floor of 12%.

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