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The Biden administration will target billionaires and corporate America with sweeping tax rises as part of a plan to cut the US’s record national debt and boost the president in the polls ahead of November’s election.
The proposals, expected to be unveiled in Thursday’s State of the Union address and over the following week, include an increase in the minimum corporate tax from 15 per cent to 21 per cent, as well as a 25 per cent minimum tax for billionaires.
The plans are intended to cut the US’s record national debt by $3tn over the next decade. According to the Congressional Budget Office, the independent fiscal watchdog, the country’s debt pile had reached $26.2tn by the end of 2023.
The proposals, which are unlikely to pass Congress but are intended to distinguish Biden’s progressive agenda from that of his Republican rival Donald Trump, come as most voters remain unconvinced by the president’s performance on the economy.
Sixty per cent say they disapprove of Biden’s handling of the economy, according to an FT-Michigan Ross poll conducted last month, while 49 per cent say they are worse off financially than when he took office.
Biden’s annual State of the Union speech marks a critical opportunity for the 81-year-old president to convince sceptical voters he is up to the task of governing for a second term.
Concerns over the president’s frailty were reinforced by a recent report from the special counsel investigating Biden’s handling of classified documents, which described the president as a “well-meaning, elderly man with a poor memory”.
One Democratic megadonor, who co-hosted a fundraiser for the president last year, told the Financial Times that Biden should “step down” for the next generation of leaders.
“I’m worried he’s not going to win,” the donor said. “Our democracy is at stake. And there’s too much on the line here for the Democrats.”
Biden’s proposal to increase the minimum corporate tax comes as 58 per cent of voters polled said large businesses were taking advantage of high inflation to raise their prices, against 36 per cent who blame Democratic policies for the surge in the cost of living.
Economists have grown increasingly concerned about the fiscal plans of both Democrats and Republicans. The CBO has warned that publicly held debt is set to rise from 99 per cent of gross domestic product at the end of 2024 to 116 per cent of GDP by the end of 2034. This would mark the highest level ever recorded.
Biden has proposed introducing a billionaire’s tax multiple times in the past few years. However the new minimum corporation tax would mark an increase from the 15 per cent that was implemented in 2022 as part of the Inflation Reduction Act.
Biden has also said in the past that he would raise the top rate of corporate tax from 21 per cent to 28 per cent.
The president’s legislative agenda has largely been stalled in Congress since the 2022 midterm elections, when Republicans regained control of the House of Representatives.
As part of the new proposals, the administration also intends to deny companies tax deductions on employees who are paid more than $1mn. This would raise more than $250bn, according to senior administration officials.
By contrast with Biden’s revenue plans, Trump is expected to propose making permanent the tax cuts introduced during his first term of office, currently set to expire in 2025.
Those cuts included a reduction in the benchmark corporate levy from 35 per cent to 21 per cent, a move that brought the US into line with averages across advanced economies.
The OECD has proposed a global deal to raise the lowest possible global corporate tax rate to 15 per cent, but many countries have yet to ratify the plan, despite signing up to it.
