Biden proposes minimum tax on households worth more than $100 million

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Washington President Joe Biden plans to propose a 20% minimum tax on households worth more than $100 million and cut projected budget deficits by more than $1 trillion over the next decade, according to a fact sheet released Saturday by the White House Budget Office.

The introduction of the minimum tax for the richest Americans would mean a major reorientation of the tax law. It would apply to the top 0.01% of households, with half of the projected income coming from households worth $1 billion or more. The minimum tax would effectively prevent the wealthiest swath of America from paying lower rates than families who consider themselves middle-class, while helping to generate income to support Mr. Biden and contain the deficit in the US economy.

In his proposal expected Monday, the lower deficits also reflect the economic recovery as the US emerges from the pandemic. It’s a sign that the government’s balance sheet will improve after a historic burst in spending to fight the coronavirus.

The disappearance of the pandemic and growth has pushed the deficit from $3.1 trillion in fiscal year 2020 to $2.8 trillion last year and is projected to be $1.4 trillion this year. That deficit spending paid off in the form of an economy that grew at a rate of 5.7% last year, the strongest growth since 1984. But inflation at a 40-year high was also accompanied by those robust gains, as high prices weighed on Biden’s popularity.

For the Biden administration, the proposal for the fiscal year starting October 1 shows that the spending burst has contributed to growth and, as a result, has made public finances more stable for years to come. A White House official, who is pushing for anonymity because the budget has yet to be released, said the proposal shows Democrats can deliver on what Republicans have previously promised without much success: faster growth and falling deficits.

Yet the Biden budget would promise to do this through a sort of wealth tax that many Republicans say would hurt the economy through private investment in companies that create jobs and make the rich spend their fortunes working abroad. to decrease.

Republican lawmakers have said the Biden administration’s spending over the past year has led to more economic pain in the form of higher prices. The inflation that accompanied the reopening of the US economy as the pandemic shutdowns began to end has been compounded by supply chain problems, low interest rates and now disruptions in the oil and natural gas markets due to Russia’s invasion of Ukraine.

Senate Republican leader Mitch McConnell of Kentucky blames Mr. Biden’s relief from the coronavirus, as well as his drive to move away from fossil fuels.

“The Washington Democrats’ response to these hardships has been as misleading as the war on US energy and the runaway spending that helped create them,” McConnell said last week. “The Biden administration seems to be trying to do everything but reverse its own disastrous economic policies.”

Mr Biden inherited from the Trump administration a budget deficit equal to 14.9% of the entire US economy. But the deficit starting in the next fiscal year will be less than 5% of the economy, putting the country on a more sustainable path, according to people familiar with the budget proposal and who insisted on anonymity to discuss future details.

The lower deficit totals will also be easier to manage, even if interest rates rise.

The projected deficit decline for fiscal 2022 reflects the solid hiring recovery driven largely by Mr Biden’s $1.9 trillion in coronavirus relief package. The additional jobs mean additional tax revenue, with the government likely to collect $300 billion more in revenue compared to fiscal 2021, a 10% increase.

Still, the country will face several uncertainties that could reform the president’s proposed budget, which will include figures that do not take into account the spending omnibus recently signed into law. Biden and his US allies are also providing aid to Ukrainians fighting Russian forces, a war that could potentially alter spending priorities and the broader economic outlook.

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