Joe Biden $1.5 trillion 'American Families Plan' taxes rich, investors for middle-class 'security'

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President Biden is set to announce a $1.5 trillion-plus proposal on Wednesday to boost federal spending on paid leave, child care and community college and raise taxes on the wealthy and investors to cover some of the costs.

The “American Families Plan,” which Mr. Biden will detail to a modified joint session of Congress, would push the price tag of Mr. Biden’s early legislative agenda north of $5 trillion since he took office nearly 100 days ago.

The plan is expected to include funding for free community college, universal pre-K programs, and paid family and medical leave, among other provisions.

White House press secretary Jen Psaki said the new plan represents a “historic investment” in education and child care.

Mr. Biden’s spending plans are needed “so we can make badly needed investments in the financial security of middle-class families as well as [in] jobs, growth and competitiveness,” Ms. Psaki said.

To pay for some of the new spending, Mr. Biden wants to increase the top individual income tax rate from 37% to 39.6%. The 2017 GOP tax law had reduced individual tax rates across the board.

Mr. Biden also would increase the tax on capital gains from about 20% to the top individual tax rate of 39.6% for income above $1 million, not including an additional 3.8% Obamacare investment income tax.

Brian Deese, director of the National Economic Council, estimated that the capital gains tax increase will directly affect roughly 0.3% of U.S. households.

“The reforms that the president will lay out are focused on this top sliver of people and treating capital gains the same as wages for that top three-tenths of a percent,” Mr. Deese said. “And we believe that it’s not only fair, but it would also help to reduce the kinds of tax avoidance that significantly undermines trust and fairness in the tax code itself.”

Mr. Biden also is expected to call for billions of dollars in additional funding for IRS enforcement, a longtime Democratic priority to try to wring additional funds out of tax cheats and scofflaws.

IRS Commissioner Charles Rettig told Congress recently that the annual “tax gap” — the difference between taxes owed and taxes collected — could be as high as $1 trillion.

The president is set to deliver his first address to a joint session of Congress before a substantially limited crowd of about 200 people in the House chamber because of coronavirus concerns.

Ms. Psaki said the president also is expected to address other topics such as policing overhaul legislation, gun control, the pandemic, the economy and foreign policy.

“He certainly recognizes the important opportunity that this offers,” Ms. Psaki said.

Expected attendees include Vice President Kamala Harris, first lady Jill Biden, second gentleman Douglas Emhoff, Secretary of State Antony Blinken, Defense Secretary Lloyd Austin and Chief Justice John G. Roberts.

It’s a much smaller crowd than a typical presidential speech at the Capitol, such as the State of the Union address, when hundreds of lawmakers cram into the House chamber to watch the proceedings.

Before his speech, Mr. Biden plans to meet with staff who were at the U.S. Capitol during the Jan. 6 attack.

The president is then scheduled to head to Georgia and Pennsylvania later in the week as he and top members of administration sell the new spending proposal to the American public.

Sen. Susan Collins, Maine Republican, won’t be in attendance but said she wants to hear Mr. Biden make some specific overtures to bipartisanship.

“I really liked his inaugural speech, but I have felt that thus far the administration is bound in a different direction,” she said. “And I want to see him pledge to be the unifier that he promised us he would be and outline specific steps on how he plans to accomplish that.”

Liberals have been clamoring for Mr. Biden to announce new plans to expand Medicare, slash prescription drug prices, and cancel up to $50,000 of student debt per borrower as part of the new catchall spending plan.

Ms. Psaki suggested Tuesday that Senate Majority Leader Charles E. Schumer of New York, who has urged Mr. Biden to unilaterally cancel student debt, might have to look elsewhere as the Department of Education reviews the issue.

“Hopefully we will make Leader Schumer happy in other ways in the speech,” she said.

Mr. Biden also is expected to tout his $2.3 trillion infrastructure proposal, which envisions a massive infusion of taxpayer money for priorities that go well beyond roads and bridges and encompass climate change, caregiving, and research and development.

Much like Mr. Biden’s infrastructure plan, which is accompanied by a suite of corporate tax increases, his “families” plan faces an uphill climb in Congress, where Democrats hold razor-thin majorities in the House and Senate.

The spending likely won’t be enough for liberal Democrats, and Republicans are essentially unified in opposition to the tax hikes.

Senate Minority Whip John Thune said raising the top individual income tax and capital gains rates would sock small businesses, discourage investment and reduce the amount of American’s nest eggs.

“These tax hikes may help Democrats usher in parts of the socialist fantasy they’ve been envisioning,” the South Dakota Republican said. “But they will do nothing to help American families gain financial stability and secure good jobs and lasting, rewarding careers.”

Congressional Democrats, meanwhile, laid out their own spending proposals in what advocates call the “care infrastructure” arena on Tuesday, some of which go well beyond the plans Mr. Biden is expected to announce.

House Ways and Means Committee Chairman Richard Neal released a plan to fund up to 12 weeks of paid family and medical leave and permanently extend expansions of several popular tax credits in the $1.9 trillion relief package, including the child tax credit.

The president is expected to propose an extension of the expanded child tax credit, which was lifted from $2,000 to up to $3,600 per child, until 2025.

“For our economy to fully recover from this pandemic, we must finally acknowledge that workers have families, and caregiving responsibilities are real,” said Mr. Neal, Massachusetts Democrat.

Ms. Psaki said the president supports the bolstered credit, which was expanded for one year in the $1.9 trillion relief package.

“There is also a cost — it’s about a billion dollars a year to implement the child tax credit,” she said. “Certainly that is part of the discussion that we expect to have with Congress moving forward.”

Sen. Elizabeth Warren, Massachusetts Democrat, joined with colleagues on Tuesday to reintroduce a $700 billion universal child care proposal that would steer money to pre-K and early learning center programs.

Ms. Warren said her wealth tax on millionaires and billionaires would more than cover the cost.

“Expanding quality child care would create jobs, increase productivity, and have lifelong benefits for children’s development and growth,” Ms. Warren said.

Grover Norquist, president of Americans for Tax Reform, said Mr. Biden and the Democrats are walking straight into a midterm buzzsaw along the lines of 1994 and 2010, when Republicans romped in the first midterm election cycles of former President Clinton and former President Obama.

“It does seem that they are not paying attention to the headwinds against them on the big picture issue: Is this necessary? Why now? Why taxes? Why this spending?” Mr. Norquist said.

Mr. Norquist’s group, which has long championed lower taxes, released a poll last week that found roughly 80% of voters say now is not the time to increase taxes with the U.S. inching out of the pandemic.

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