Will we finance Biden’s spending with confiscatory taxes?

President Biden has unveiled a multi-trillion-dollar program of federal spending that makes Lyndon Johnson’s Great Society look like a stingy gratuity. But there is a confiscatory flavor in how he plans to pay for it.

Biden is busily working on his speech Wednesday to a joint session of Congress in which he is expected to celebrate the accomplishments of his first 100 days in office.

His programs, including provisions for COVID relief, infrastructure modernization and a basket of economic benefits featuring early education and home care, are certain to increase the federal deficit and soaring national debt; but face it, both are here to stay. As former Vice President Dick Cheney purportedly once put it, “deficits don’t matter.”

Biden gets high marks for his handling of COVID-19 and his empathetic determination to help the American people. 

But he proposes to pay for his programs with confiscatory taxes on “the rich,” with broad and deleterious social and economic implications. The crowning glory of Trump’s legislative cassoulet, the 2017 tax law which added $1.56 trillion to the national debt, lowered the corporate tax rate to the present 21 percent level. Biden wants to increase the corporate rate to 28 percent. Leading Republicans, like Sen. Shelley Moore Capito (R-W.V.), have said that increasing corporate tax rates was a “non-negotiable red line…a non-starter.” She is a voice crying in the wilderness, as the Democrats have the votes. Her remark caused powerful Democrats like Senate Finance Committee Chair Ron Wyden (D-Ore.) to shoot back that Republicans want “middle class families [to]..foot the bill for everything from roads to water to broadband, while mega-corporations not pay a penny more in taxes.”

But there is more to Biden’s tax plan than increasing the tax rate on corporate income. At the heart of Biden’s proposal, yet to be finalized, is a tax not on income but on wealth that has been previously taxed. Capital gains taxes, designed to encourage investment, would nearly double from 20 percent to 43.4 percent, including a surtax, more than the top federal tax rate on earned income. Appreciated assets held until death would not get a step-up, and so be taxed twice, once as capital gains and a second time as assets trapped in the taxpayer’s estate.

Private philanthropy would also take a hit. Biden is mulling a proposal to limit the value of the charitable itemized deduction for those making $400,000 or more to 28 percent. The present deduction is worth 37 percent to high income taxpayers, and could amount to 39.6 percent if tax rates on “the rich” are increased. Some critics fear that the plan will “pause charitable giving at best and suffocate it at worst.” One critic argues that the proposed measure would only lead to government “bulking up” at the expense of charities, undercutting the American tradition of charitable groups operating independently.

And there is more. As an add-on to his tax measure, Trump capped the deduction for state and local taxes (SALT) at $10,000. He saw this as a rebuke to “high tax” blue states such as California, Illinois, New Jersey and New York, which provide allegedly wasteful social programs, and run large budgetary deficits.

With wealthy taxpayers leaving their states for Florida, Texas or Colorado, urban Democrats want to repeal the cap on SALT deductions. In an open letter addressed to House Speaker Nancy Pelosi (D-Calif.) last week, 17 of the 19 New York Democrats threatened to withhold support for Biden’s tax plan unless it eliminates the SALT cap. 

“This issue is so critical to our state and our constituents that we will reserve the right to oppose any tax legislation that does not include a full repeal of the SALT limitation,” the letter states. Congressmen from New Jersey and California have taken a similar “no SALT, no dice” stand.

The editorial board of the New York Times urges Congress to repeal the SALT deduction altogether, arguing that the “primary beneficiaries would be the one percent of American household with highest incomes.” The editors argue that: “New Yorkers, who pay higher taxes than most Americans, get more extensive and higher quality public services.” Really? Tell that to any resident of New York City, where the public schools are in crisis, crime rates are soaring and rubbish removal is third world.

Many of Biden’s programs are commendable and have achieved popular support. While a Washington Post-ABC poll finds that Republican views have not changed over the years, with 79 percent favoring a smaller government as opposed to 81 percent in 2012, Democrats and independents have intensified their preference for larger government assistance. According to an NBC News/WSJ poll this year, 57 percent of registered voters want government to solve more problems, with 38 percent believing government is doing too much. 

In his first inaugural address, Ronald Reagan famously said: “In this present crisis, government is not the solution to our problem; government is the problem.” This is debatable. Government has stood up well in the COVID-19 crisis and beyond. But in our zeal to create a more equal society, we should not confiscate the wealth of the nation.

James D. Zirin is a lawyer and author. His latest book is “Plaintiff in Chief-A Portrait of Donald Trump in 3500 Lawsuits.”