President Joe Biden on Wednesday released a $1.8 trillion proposal that would hike taxes on the wealthiest Americans and close loopholes to fund free preschool for three- and four-year-olds, paid family and medical leave, an extension of the boosted child tax credit, investments in affordable child care, and other domestic priorities.
The American Families Plan, the second prong of Biden's infrastructure and recovery package, would raise the top marginal tax rate on the richest people in the U.S. from 37% to 39.6%, reversing part of former President Donald Trump's 2017 tax law.
The proposal would also close the so-called carried interest loophole—a tax break that benefits hedge-fund and private-equity executives—and increase the top tax rate on capital gains and dividends from 20% to 39.6% for households bringing in more than $1 million a year.
To ensure that rich Americans actually pay what they owe, Biden is calling for a significant investment in the Internal Revenue Service to provide the agency with resources to crack down on tax avoidance. According to a recent analysis by IRS researchers and academics, the richest 1% of U.S. households don't report around 21% of their income.
"Taxes have become almost optional for the super-rich," Chuck Collins, director of the Program on Inequality at the Institute for Policy Studies, said in a statement Wednesday. "President Biden's plan is a welcome first step in reversing wealth hoarding and tax avoidance by billionaires and multi-millionaires."
SCROLL TO CONTINUE WITH CONTENT
Never Miss a Beat.
Get our best delivered to your inbox.
The president's tax plan—which omits an estate tax increase that he promised on the campaign trail—was devised to cover the cost of a significant expansion of the nation's tattered social safety net. Biden is expected to highlight his new proposal during an address to a joint session of Congress on Wednesday night.
According to a fact sheet released by the White House Wednesday morning, Biden's plan would invest $225 billion in child care, establish a national paid family and medical leave program, expand Affordable Care Act subsidies, provide universal preschool, and guarantee every American two years of tuition-free community college.
"We have very good data showing the benefits to kids, and their subsequent careers, from having good child care and preschool. We lag enormously in providing child care, and if we want people to be able to work, they need something to do with their kids," Dean Baker, senior economist at the Center for Economic and Policy Research, told the Washington Post. "The people making out like bandits over the last four decades are the top one or two percent—that makes sense for who you'd look to to get the money from first."
While the package includes some key priorities of progressive lawmakers, they are likely to be frustrated by Biden's decision to leave out Medicare expansion and a plan to significantly lower prescription drug prices, proposals that Sen. Bernie Sanders (I-Vt.), Rep. Pramila Jayapal (D-Wash.), and dozens of others have advocated in recent weeks.
Speaking to reporters on Tuesday, Sanders—the chair of the Senate Budget Committee—vowed that Medicare expansion and drug-pricing provisions will make it into the final legislative package "if I have anything to say about it."