Here’s what Biden’s 2024 budget does on taxes

President Biden is playing the hits on tax policy in his budget for fiscal year 2024, revisiting a number of Democratic classics proposed by his and previous administrations that are sure to be ignored by Republicans.

The proposals include a beefed-up version of the child tax credit (CTC), a boost in the corporate tax rate from 21 to 28 percent, a minimum income tax on billionaires, an expansion of the corporate buyback tax from 1 to 4 percent, an expanded earned income tax credit for low-income workers, tax credits for affordable housing, as well as an increase in the Medicare tax rate for high earners that was announced earlier this week.

“None of the tax increases…are going anywhere”

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The largest single revenue raiser in the proposal is the increased corporate tax rate, which the White House Office of Management and Budget says will bring in $1.3 trillion over the next decade.

This money would go toward “cutting taxes for working people and families with children, providing paid leave, and improving home care” as well as strengthening the public health system.

Quadrupling the stock buyback tax and changing the global corporate minimum tax would generate $1.2 trillion, which would be spent on lowering the cost of childcare, pharmaceutical drugs, housing and education, the White House says.

While pledges to make wealthy taxpayers and large corporations pay more in taxes may be resonating with Americans as elevated levels of inflation continue to harass American pocketbooks, Republican control of the House means few, if any, of Biden’s proposals have a chance of making it into law.

“None of the tax increases in this proposal are going anywhere,” said tax policy expert Howard Gleckman with the Urban-Brookings Tax Policy Center, a left-leaning non-partisan think tank, in an interview with The Hill.

“The idea that House Republicans are going to accept any tax increases is just far-fetched.”

Where Congress could compromise

Still, with the prospect of a default on the national debt looming this summer that will force lawmakers to the negotiating table, some Beltway insiders think a compromise on tax credits that nearly came to fruition at the end of last year could be a path for some of the president’s tax agenda to make it into law.

That compromise was an expanded version of the CTC in exchange for tax credits that are favored by big business.

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“The only thing that might see some real legislative potential here is something on the child tax credit – maybe refundability for the child tax credit paired with some things that aren’t here in the budget, like bonus depreciation and research and development,” said Erica York, an economist with the Tax Foundation, a right-leaning non-partisan think tank, in an interview.

“Of course, that couldn’t make it through last year, so I’m not sure it’ll make it through this year, but I don’t really see anything else being feasible,” she added.

Fighting for a bigger child tax credit

Biden is proposing an expansion of the CTC from $2,000 per child to $3,000 for children over six and $3,600 for children under six. 

A similar expansion that was enacted during the height of the coronavirus pandemic and has since lapsed made a huge dent in child poverty levels in the U.S., reducing them by 26 percent and lifting more than 3 million children out of poverty on a monthly basis, according to research by Columbia University.

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Tax professionals say they saw the effect that the expanded tax credit had on people’s lives.

“The CTC was not difficult to administer,” said H&R Block tax associate and instructor Joseph P. Marino, who helps people do their taxes in Brooklyn, New York.

“People were coming in and it made them become more happy.”

Advocates for the CTC also celebrated its inclusion in Biden’s 2024 budget, along with the earned income credit, after the tax deal fizzled last December.

“Last year … we were disappointed when these efforts were stalled by Congressional gridlock. We are pleased that the White House has redoubled its efforts to support direct cash payment programs,” Adam Ruben, a strategist and vice president with the Economic Security Project, an advocacy group, said in a statement.

In order of importance, the top-priority tax changes at the end of last year for the U.S. Chamber of Commerce were for research and development, interest deductibility and bonus depreciation.

Interest deductibility refers to limits for deductions that businesses can claim on interest payments. Bonus depreciation would allow companies to write off major investments in the year they’re purchased and not over the span of many years.

Bipartisan interest in stock buyback taxes

Another tax change proposed by Biden that could potentially gain some traction is on stock buybacks. Buybacks were taxed last year at 1 percent as part of Democrats’ Inflation Reduction Act and the new budget proposes boosting that tax at 4 percent.

Buybacks were illegal and considered a form of market manipulation until 1982, according to the Harvard Law School Forum on Corporate Governance.

“There has been bipartisan interest in buybacks,” tax expert Steve Rosenthal of the Tax Policy Center told The Hill. “You can imagine if there were ever a bipartisan package, there could yet be interest in raising the buyback excise tax.”

“I think it’s appropriate,” Rosenthal added. “I think it’s foreign investors that largely favor buybacks, so there’s plenty of revenue to be had at relatively little political cost.”

Long-shot proposals in a divided Congress

With Democrats in control of the Senate and Republicans in control of the House, not much is expected during the 118th Congress in the way of major changes in national tax policy. Many of Biden’s other proposals, such as the tax on billionaires and the end to oil and gas tax subsidies, serve mostly as longer-term messaging for Democrats.

“The tax code currently offers special treatment for the types of income that wealthy people enjoy,”  a summary of the president’s budget provided by the White House reads.

“While the wages and salaries that everyday Americans earn are taxed as ordinary income, billionaires make their money in ways that are taxed at lower rates, and sometimes not taxed at all.”

Democrats are keen to broadcast such messages despite the lack of political feasibility for many of the proposals.

“[The budget reforms] our tax code to reward work, not wealth,” Shalanda Young, director of the White House Office of Management and Budget, said on a call Thursday morning. “That’s a very clear contrast with Congressional Republicans.”