Biden’s New Budget Proposes a $4.7 Trillion Increase in Taxes

President Biden’s Fiscal Year 2024 Budget has proposed a series of major tax increases, totaling nearly $4.7 trillion, aimed at businesses and high-income individuals. These proposals include higher marginal tax rates on corporate, individual, and capital gains income; a new minimum tax on high-net-worth individuals; and increases to Medicare taxes. Several tax credits would also be expanded or created, offsetting the gross taxes by about $900 billion and resulting in a net tax increase of $3.8 trillion. After factoring in $1 trillion of additional new spending, the FY2024 Budget would reduce the deficit by $2.8 trillion over the next decade.

However, the Biden budget does not include a concrete proposal for extending the individual income tax cuts from the 2017 Tax Cuts and Jobs Act (TCJA) that will expire after 2025, nor the temporary expansion of the Child Tax Credit (CTC). These extensions would likely offset the projected deficit reductions.

The recent help to small businesses with PPP loans and expanding of the Jumpstart Our Business Startups (JOBS) Act have helped small businesses considerably in recent years. But this proposed tax plan would be a considerable hit to small and large businesses in the U.S. The JOBS Act allows everyday investors to invest in startups and small businesses, which has resulted in billions raised for American small businesses on platforms like StartEngine and Wefunder. This includes StartEngine itself, which has raised over $70 million from everyday investors and $12.5 million in its current funding round, which anyone can invest in.

The proposed tax increases would move the United States’ top tax rates far beyond international norms, potentially reducing competitiveness and economic growth. For example, the top combined marginal rate on individual income would rise to 45.4%, the top rate on capital gains income would increase to 49.8%, and the top rate on corporate income would grow to 32.2%. The combined integrated rate on corporate income would rise to an astonishing 66.0%.

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These tax increases would place added pressure on combined top tax rates at the state and local levels. For instance, Biden’s FY 2024 Budget would result in combined top marginal rates exceeding 50% in five states and D.C.: New York (54.4%), Oregon (53.5%), California (52.9%), New Jersey (51.4%), Hawaii (50.6%), and D.C. (50.4%). Marginal rates would also surpass 50% in New York City (54.4%).

The Biden budget includes a 15% increase in funding for the Internal Revenue Service (IRS), amounting to approximately $1.8 billion, raising the total to $14.1 billion in FY 2024. The budget aims to expand the drug pricing provisions enacted in the Inflation Reduction Act (IRA) and proposes several significant changes to the international tax system that would move the U.S. closer to global minimum tax rules.

Critics argue that the Biden administration’s tax proposals will weaken U.S. tax competitiveness internationally and could negatively impact economic growth. The proposed tax increases place the U.S. further out of step with international norms, raising concerns about the potential long-term consequences for the nation’s economy and global standing.

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