US Biden Sets Record Defense Budget of '1111 Trillion Won'... Also Officially Announces Wealth Tax Increase

The U.S. administration under Joe Biden has formalized a plan to increase taxes on the wealthy in order to reduce the federal deficit by approximately $3 trillion (about 3,948 trillion won) over the next decade. The plan freezes taxes for citizens earning less than $400,000 annually, while significantly raising taxes on large corporations and the wealthy. In response to threats from China, Russia, and others, the defense budget has been set at a record high of $842 billion. However, the Republican Party, which holds the authority to process the budget, immediately opposed it as a "roadmap to fiscal ruin," leading to assessments that the original proposal is unlikely to pass as is.

[Image source=AP Yonhap News]

On the 9th (local time), President Joe Biden visited Philadelphia, Pennsylvania, to unveil the 'Fiscal Year 2024 (October 1, 2023 ? September 30, 2024) Budget Proposal' containing these details. In a speech lasting about 50 minutes at a labor union hall, President Biden introduced the plan by saying, "My budget is an investment in America and for all of America," and "It will ease the burden on American families."

The most prominent aspect of this approximately $6.9 trillion (about 9,100 trillion won) budget proposal is the tax increase plan targeting corporations and the wealthy. The Biden administration intends to use this as a basis to expand the social safety net and reduce the federal deficit by about $2.9 trillion over ten years. This deficit reduction is 50% larger than the $2 trillion figure presented by President Biden in his State of the Union address last month.

Accordingly, the Biden administration plans to apply a minimum tax rate of 25% to asset holders in the top 0.01%. The top income tax rate for individuals earning over $400,000 annually will be raised from 37.0% to 39.6%. The corporate tax rate will be increased from 21% to 28%. Taxes on hedge fund managers' performance fees will also be raised. Additionally, to secure Medicare funding that provides medical services to the elderly, the Medicare tax rate on incomes over $400,000 will be increased up to 5%. President Biden emphasized that "No billionaire should pay lower taxes than school teachers, firefighters, or those of you here at the union hall," highlighting that the revenue from tax increases will be invested in welfare.

The defense budget has been set at $842 billion (about 1,111 trillion won), a 3.2% ($26 billion) increase compared to this year's budget, marking the largest ever. Notably, the budget for maintaining nuclear deterrence reaches $37.7 billion. The National Nuclear Security Administration (NNSA) has also been allocated $23.8 billion for nuclear stockpile and risk reduction. Local media evaluate this as directly linked to the overt military and economic threats posed by China.

The Biden administration also stated, "this budget prioritizes addressing China's challenge according to the National Defense Strategy (NDS) to maintain and strengthen deterrence," clearly sending a message of containment toward China. Furthermore, "it focuses on maintaining strong deterrence against China and Russia while enabling responses to other ongoing threats, including those posed by North Korea, Iran, and violent extremist organizations," emphasizing the need for countermeasures against North Korea.

Explicit containment of China, which is engaged in a hegemonic competition, is reflected not only in the defense sector but also in budgets such as that of the Department of Commerce. When introducing the department's budget proposal, the U.S. Department of Commerce announced, "We are considering establishing a program to address national security risks related to overseas investments by U.S. capital." The purpose is to prevent U.S. capital and expertise from providing funding necessary for technological advancements in other countries in key industries, which could undermine U.S. security. The Department of Commerce allocated $5 million to the International Trade Administration (ITA) to assist the Treasury Department in implementing this program.

[Image source=EPA Yonhap News]

However, since the authority to process the budget lies with the House Republicans, the likelihood of President Biden's budget proposal passing in its original form is low. Unlike South Korea, the U.S. Congress holds the authority to draft and review the budget. The budget proposal released by the Biden administration on this day serves only as a reference during congressional budget discussions.

The Republican Party immediately expressed opposition. House Speaker Kevin McCarthy, a Republican, dismissed the plan, saying, "I don't think raising taxes is the answer." He also posted a critical message on his Twitter, stating, "Mr. President, Washington has a spending problem, not a revenue problem." Republican Senator Charles Grassley labeled it a "roadmap to fiscal ruin." Jodey Arrington, Republican chairman of the House Budget Committee, described it as "bureaucracy that sacrifices working families and burdens our descendants."

Bloomberg News pointed out the differences in views between the government and Republicans, calling the budget proposal "a wish list with little practical meaning." The New York Times (NYT) reported that "the White House's plan to reduce the deficit was met with ridicule by Republicans," while noting that "the budget proposal is one of the few areas where the Biden administration might gain Republican support in countering China."

Some analysts suggest that President Biden's budget announcement is more of a political campaign move, given the low likelihood of the original proposal passing due to Republican opposition. A representative example is Biden's choice of the Philadelphia labor union hall instead of the White House as the venue for unveiling the budget. Behind President Biden during the announcement were phrases such as 'USA 46,' 'Investing in America,' and 'Strong Unions.' The NYT described this as "a blueprint for potential reelection campaign messaging strategy."

This content was produced with the assistance of AI translation services.