Biden proposes budget that targets Trump’s ‘fiscal mess’, raises taxes on wealth

The budget would also raise the corporate tax rate to 28 per cent. PHOTO: REUTERS

WASHINGTON (REUTERS) - United States President Joe Biden on Monday (March 28) submitted a US$5.79 trillion (S$7.9 trillion) budget plan to Congress that calls for record peacetime military spending and further aid for Ukraine, while raising taxes for billionaires and companies and lowering government deficits.

Mr Biden’s budget proposal for the 2023 fiscal year starting on Oct 1 lays out his administration’s priorities, including campaign promises to make the wealthy and companies pay more tax. It is merely a wish list as lawmakers on Capitol Hill make the final decisions on budget matters.

House Speaker Nancy Pelosi said Congress looked forward to working on Mr Biden’s “bold fiscal blueprint". Republicans and moderate Democrats killed similar tax proposals in the 2022 budget.

The plan was based on economic assumptions from November, well before Russia’s invasion of Ukraine, which has exacerbated previous inflationary pressures on energy and food prices, but Mr Biden’s top economic adviser Cecilia Rouse said the administration still sees the US economy strengthening and inflation easing over the coming year.

“The budget I am releasing today sends a clear message to the American people (about) what we value: first, fiscal responsibility, second, safety and security, and thirdly...the investments needed to build a better America,” Mr Biden told reporters at the White House.

The Democratic president said he was calling for higher defence spending to strengthen the US military and “forcefully respond to (Russian President Vladimir) Putin’s aggression against Ukraine” with US$1 billion in additional US support for Ukraine’s economic, humanitarian, and security needs.

The document offers fresh insight into Mr Biden’s thinking as he attempts to halt the largest war in Europe since World War Two and prepares for a Nov 8 midterm election that could see his Democratic Party lose control of Congress.

His administration is “making real headway cleaning up the fiscal mess I inherited”, Mr Biden said, and would reduce the federal deficit by more than US$1.3 trillion this year with US$1 trillion in further reductions planned over the next decade.

“For most Americans the last few years were very hard, stretching them to the breaking point. But billionaires and large corporations got richer than ever,” he said, adding,“That’s not fair.”

The US federal government, on the hook for rising healthcare and social spending, especially for older Americans, has spent more money than it has taken in for each of the last 20 years.

Billionaires tax

Ms Lindsey Graham, the top Republican on the Senate Budget Committee, said Mr Biden’s tax hikes would harm US workers and the overall economy, while increasing deficits.

Under Mr Biden’s policies, deficits as a share of the economy would fall to 5.8 per cent of gross domestic product (GDP) this year and stay below 5 per cent over the next decade. That compares to 14.9 per cent of GDP in 2020, the last year of the Trump administration, the White House said.

Mr Biden’s plan increases spending on community policing, efforts to fight gun crime, and bigger investments in crime prevention and community violence interventions, as well as some Us$50 billion in added funding to address the critical shortage of affordable housing.

The plan does not include line items for bolstering climate change, healthcare, education, and manufacturing competitiveness, after disagreements within the Democratic party sank Mr Biden’s “Build Back Better” bill.

Instead, it has a deficit-neutral reserve fund to allow lawmakers to negotiate those items, said Ms Shalanda Young, director of the Office of Management and Budget.

It introduces a new minimum tax requiring the very wealthy to pay at least 20 per cent of their income in taxes, including on the gains on investments that have not been sold.

That tax would apply to 0.01 per cent of American households – those worth more than US$100 million – with more than half of the new revenue coming from households worth more than US$1 billion, the White House said. It would reduce the government deficit by US$360 billion over the next decade.

The budget plan also targets US corporate buybacks, requiring company executives to hold on to company shares that they receive for several years after a stock buyback.

The budget would raise the corporate tax rate to 28 per cent while making changes to the corporate tax code to reward job creation and investment.

It calls for US$773 billion for the Department of Defence, plus US$40 billion for defense-related programmes at the Federal Bureau of Investigation, the Department of Energy and other agencies.

Russia’s Feb 24 invasion of Ukraine has intensified concerns about European security, while the Biden administration continues to invest in research and development of hypersonic missiles and other modern capabilities.

The US is not directly engaged against Russia in the Ukraine war but is giving Kyiv weapons and extensive assistance. Working with European allies, it also has imposed heavy economic sanctions against Russia.

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