Good morning and welcome to the latest in our series, “The Biden Agenda.” We’ve invited some of the smartest thinkers and subject-matter experts we know to contribute to what will become an occasional series on what a Biden presidency might look like. Today, Brian Riedl, a senior fellow at the Manhattan Institute, breaks down Biden’s various spending proposals. Please see our past entries from Scott Lincicome on trade, James C. Capretta on health care, and Steven F. Hayward on climate change.
Despite an unprecedented $24 trillion in budget deficits projected over the next decade, Joe Biden is promising the largest spending spree since Lyndon Johnson. And despite the deepest recession in 80 years, Biden is demanding the largest permanent tax increase since World War II. Can gridlock save taxpayers and the federal budget from these exorbitant costs?
First, the numbers. Biden has proposed $11 trillion in new spending over the decade. His $1.4 trillion health care plan would expand the Affordable Care Act, bring a “public option” to the health exchanges, and expand long-term care assistance. More recently, Biden proposed reducing the Medicare eligibility age to 60, at an estimated cost of $300 billion. He also has proposed new spending on climate and infrastructure ($2 trillion), Social Security and Supplemental Security Income ($1 trillion according to the Progressive Policy Institute), college, K-12 education, and preschool aid ($1.5 trillion), family leave assistance ($550 billion), “Buy America” investments ($700 billion), housing aid ($640 billion), and combatting opioid addiction ($125 billion). Finally, Biden has endorsed the $3 trillion in stimulus spending passed by the Democratic House.
He would pay for one-third of this new spending with $3.6 trillion in new taxes over the decade—which, at 1.3 percent of the economy, would represent the largest permanent tax increase since World War II. This includes a $2.1 trillion corporate tax increase that would more than reverse the $330 billion tax cut that corporations received in 2017. Biden would also restore the pre-2017 tax rates for high-earning families (including phasing out the tax deduction for pass-through businesses), cap their tax deductions, and approximately double the top capital gains tax rate. The full 12.4 percent Social Security payroll tax (which currently applies to wages up to $137,700) would be re-imposed at wages above $400,000. Overall, a typical middle-income family would see a $300 tax increase (rising to approximately $1,200 in 2026 if the 2017 tax cuts also expire), versus $300,000 in annual new taxes for the richest 1 percent of earners. Marginal income tax rates would reach 64 percent for some taxpayers when including state taxes, and the tax on inflation-adjusted investment returns would exceed 60 percent for many taxpayers.