Tax hikes in Biden's spending plan could raise $500B less than estimated, analysis shows
Biden's tax hikes may only raise $1.5T in revenue over next decade
Grover Norquist on taxes, possible expansion of IRS
Americans for Tax Reform President Grover Norquist on the debt ceiling, taxes, spending and infrastructure negotiations and the possible expansion of the IRS.
President Biden on Thursday outlined a slew of new taxes on corporations and the ultra-wealthy in order to pay for the bulk of his signature economic spending plan – but a new analysis suggests the rate increases could generate $500 billion less than the White House estimated.
Findings from the Penn Wharton Budget Model, a nonpartisan group at the University of Pennsylvania's Wharton School, show that Biden's tax plan would actually raise about $1.5 trillion ($1,527,000,000,000) over the next decade, well below the nearly $2 trillion ($1,995,000,000,000) projected by the Biden team. That marks a difference of roughly $468 billion.
Although the White House initially proposed steep increases in corporate taxes, capital gains taxes and income taxes, the bulk of those plans appear to have fallen to the wayside after pushback from Sen. Kyrsten Sinema, D-Ariz. The majority of former President Donald Trump's signature 2017 tax law, which substantially lowered rates for corporations and well-off Americans, will likely remain intact in the newest Build Back Better plan.
U.S. President Joe Biden speaks during a campaign event for Terry McAuliffe, Democratic gubernatorial candidate for Virginia, in Arlington, Virginia, U.S., on Tuesday, Oct. 26, 2021. Photographer: Al Drago/Bloomberg via Getty Images (Photographer: Al Drago/Bloomberg via Getty Images / Getty Images)
The framework that Biden rolled out relies on a 15% corporate minimum tax, surtaxes on the top sliver of U.S. households, stricter tax enforcement, taxes on corporate stock buybacks and higher taxes on U.S. companies' foreign earnings.
"The plan is more than fully paid for by asking the wealthiest Americans and most profitable corporations to pay their fair share. It does not raise taxes on small business and anyone making less than $400,000 per year," the White House said in a fact sheet. "It will also generate economic growth that will increase tax revenue and contribute to deficit reduction."
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Some of the biggest revenue discrepancies in Biden's plan stem from the proposed 15% minimum on corporations based on profits they report to shareholders, a tax that would only apply to companies that reported over $1 billion in income for three straight years. Although the White House estimated the minimum could increase tax revenue by $325 billion, Penn Wharton found it would be closer to $195 billion.
Another major difference stems from the 1% surcharge on stock buybacks to deter companies from repurchasing their own stock from investors. The Biden administration predicted the stock buyback surcharge could generate about $125 billion in revenue, while Penn Wharton estimated it would only create about $50 billion.
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Finally, the White House plan to beef up IRS enforcement by giving the agency more funding to hire more enforcement agents, modernize outdated technology and invest in taxpayer services would only raise about $190 billion – less than half of the $400 billion predicted by the Biden team, according to Penn Wharton.
That's in part because the president abandoned a deeply controversial plan that would force banks and other financial institutions to turn over more account information to the IRS for customers with annual inflows and outflows above $600. The IRS reporting plan could have increased the overall estimate by about $300 billion, the Penn Wharton analysts said.