President Joe Biden says he won’t stand in the way of anyone trying to become a billionaire, but that doesn’t mean he won’t step in to tax the rich or corporate America.
Biden will take the stage Tuesday night for his second State of the Union address, where he will deliver his annual message to Congress outlining the nation’s economic, political, and legislative status. The president is expected to lean into positive economic news such as a strong labor market, but is also likely to be met with hostility from Congressional Republicans over inflation and a debt ceiling standoff.
Proposals to raise taxes on billionaires and corporations are set to be key components of Biden’s economic agenda during the address, plans that likely won’t be making him any new friends from the right wing of Congress. The president is demanding lawmakers significantly hike the tax rate on corporate buybacks, and he’s reiterating a proposal from last year that was dismissed by Republicans: A billionaire minimum tax that would make ultra-wealthy Americans pay a tax rate in line with their riches.
Biden will call on Congress to pass his minimum tax proposal Tuesday evening, according to a preview of his speech released by the White House Monday, which described his proposed changes to the tax code as a fight to protect the interests of working-class households.
“President Biden is a capitalist and believes that anyone should be able to become a millionaire or a billionaire. He also believes that it is wrong for America to have a tax code that results in America’s wealthiest households paying a lower tax rate than working families,” the White House wrote.
Taxing their fair share
Biden proposed a tax rate floor for billionaires of 20% in a budget request to Congress last year on the grounds that the bulk of billionaires’ incomes are from their unrealized investment income, which are not taxed until a share is sold. This put working-class Americans who pay larger shares of income tax at a disadvantage, Biden argued.
Biden will make another case for a billionaire minimum tax tonight, pledging in his speech that taxes will stay the same for all Americans earning less than $400,000 a year.
The minimum tax is only one of the tools at Biden’s disposal to level the playing field between the country’s ultra-wealthy and everyone else. He will also demand Congress quadruple the tax rate levied on corporate stock buybacks, in which companies buy back their own stock, often to increase the price and enrich investors.
Biden’s speech cited a 2015 Reuters report that linked stock buybacks to executive overcompensation, even when the companies themselves were underperforming.
By taxing stock buybacks, Biden is aiming for corporations to reinvest their profits into the national economy rather than increase executive pay, the White House wrote, in a bid to avoid a similar situation last year with the oil and gas industry.
The president had several run-ins with corporate oil and gas executives last year, when fossil fuel companies were enjoying huge profits, but were reluctant to abide by Biden’s request to increase domestic oil production when pump prices surged in the U.S. due to the Ukraine War.
“Last year, oil and gas companies made record profits and invested very little in domestic production and to keep gas prices down—instead they bought their own stock, giving all that profit to their CEOs and shareholders,” the speech read.
With oil and gas profits still going strong in 2023, Biden is angling for a stricter tax policy on stock buybacks to funnel excess revenue into the economy as a whole.
Dead in the water
While Biden is set to make a plea for Congress to consider higher tax rates, his proposals are unlikely to be successful in a historically adversarial climate in D.C.
Biden’s billionaire minimum tax request last year was axed when centrist Democrats including Sen. Joe Manchin III rejected it, claiming that taxes on unrealized income would never work. Arizona Sen. Kyrsten Sinema—who changed her party affiliation to Independent late last year—has also opposed proposals to increase tax rates for high-income Americans during Biden’s tenure.
Democrats held a majority in both chambers of Congress at the time, and getting a billionaire tax proposal over the line is even more difficult for Biden now that Republicans are in control of the House.
There are also other big economic problems on the horizon for Congress. The U.S. budget hit a debt ceiling last month, forcing Treasury Secretary Janet Yellen to announce “extraordinary measures” to keep paying the bills until June before the government defaults on its debt.
In the next few months, Congress will have to figure out how to avoid a self-inflicted economic disaster. Biden and Democrats are arguing that some of the fiscal responsibility can be shifted to corporations and the country’s extremely wealthy, while Republicans have demanded cutting spending on government programs.
Biden has said spending cuts are “not negotiable,” but invited Republican congressional leaders to discuss the issue further. This week, top House Republican Kevin McCarthy also expressed an openness to negotiating with Biden and Democrats.
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