When Joe Biden took office, the country was slowly reopening following what many now believe was an unnecessarily damaging lockdown. To get the economy moving again, the president proposed several massive spending bills that included cash for taxpayers, businesses, and entire industries.
After Congress appropriated more than $5 trillion to deal with the pandemic, the president’s massive overspending took the restraints off of prices and let loose an inflationary spiral that is going on to this day.
Biden tried to explain the price increases away by blaming the war in Ukraine, “supply chain problems,” and, of course, Trump came in for his share of the blame as well. But now that the supply chain is fixed, Trump is out of office, and energy deficits from Ukraine have been made up, why is inflation still roaring ahead at 6.4%?
All that spending has created a deficit of $1.4 trillion in FY 2023 with $2 trillion deficits for the next 10 years.
Biden is readying the fiscal year 2024 budget and will make public many aspects of it today. Of particular note is Biden’s idea to “tax the rich” more than $2 trillion over the next 10 years, including a healthy 5% “surtax” on those making over $400,000 a year.
Biden claims the surcharge will extend the life of Medicare by 25 years. That remains to be seen. And trying to get the surcharge and the “tax the rich” scheme through a divided Congress would appear to be impossible.
This is especially true since so much of that “income” that Biden wants to tax doesn’t even exist except on paper.
“Mr. Biden is expected to announce a new tax on American households worth more than $100 million that would apply to both their earned income and the unrealized gains in the value of their liquid assets, like stocks,” read a companion piece in the New York Times.
But it’s the Medicare “surcharge” that promises to incite a donnybrook on Capitol Hill.
The White House said in a fact sheet that the president wants to increase the Medicare tax rate on earned and unearned income above $400,000 from 3.8 percent to 5 percent.
Senate Democratic aides on Tuesday weren’t certain whether that threshold applied to individuals or couples and said they would await clarification from the White House.
Sen. Bob Menendez (D-N.J.), who represents a state with a high cost of living and is an outspoken proponent of lifting the cap on state and local tax deductions in expensive areas of the country, also declined to comment on Biden’s proposal.
Idaho Republican Sen. Mike Crapo said that raising taxes to pay for Medicare without reform measures to deal with rising costs is the wrong approach.
“We’ve been expecting that the president will try to claim he’s doing deficit reduction or trying to save some of these funds that are in jeopardy by proposing tax increases rather than reforms. My first feeling is that is not the first direction we should go in trying to deal with the Medicare Trust Fund,” he said. “I think it will run into some trouble here.”
Indeed, Medicare is a mess. And just slapping some tax increases on top of a broken system will only make it that much more expensive to fix.
In Biden’s New York Times op-ed published yesterday, the president claimed that his budget goals would be met by forcing high-earners “to pay just a little bit more of their fair share.”
National Review‘s Noah Rothman shows the fallacy of “just a little more.”
“More,” but never quite enough. Fairness, the sentence implies, is a moving target — ill-conceived and forever just over the horizon. That vagueness is probably necessary if Biden and his fellow Democrats are to succeed in their new effort to reconceptualize the very notion of income and transform it into a pliantly taxable abstraction.
To meet America’s ballooning non-discretionary spending obligations, the Biden White House has endorsed levies on income that has not yet been and may never actually be earned.
Taxing this “ghost money” is only the beginning.
The Biden administration has played with this concept for some time. A March 2022 White House fact sheet introduced the idea of a “billionaire minimum income tax,” which would allow the treasury to confiscate 20 percent of all income among the highest earners, whether they’ve earned it yet or not. They pitched it as a “prepayment on future capital gains” without waiting for the actual “gains.”
We’ll have to see when the budget is released, but I would suspect that any effort to actually cut the budget will be a matter of smoke and mirrors. For every dollar cut, there will be two dollars in additional federal spending.
This budget fight will run into a war over raising the debt ceiling. From now until June when a U.S. default is being predicted, there won’t be much comity on Capitol Hill.