It’s important to keep the economy running and prevent the U.S. government from shutting down due to a lack of funds and an agreed-upon budget. This is one job that Congress, the Senate, and President Biden are currently focusing on.
In addition, Biden wants parts of this economic agenda to get signed into law, which requires passage of a bill that first needs to go through a special House committee. Since they have approved part of this measure, the one that allows for the IRS to raise taxes in order to pay for parts of the bill, everyone, from businesses to individuals, need to be aware of what’s going on in order to properly prepare for what is to come.
What’s On Biden’s Economic Agenda?
President Biden made a number of promises while campaigning. These included doing whatever he could to help the American economy recover from the impacts of the COVID-19 pandemic, as well as providing additional stimulus money for citizens. He accomplished the latter with the American Rescue Plan, which he signed into law in March 2021. However, he has plenty of other economic plans that he wants to enact, including the following.
- Helping the Middle Class – Currently, the middle class (also known as those who make between $48,500 and $145,500 for a family of three) is shrinking in size. The number of people living on less than $48,000 per year is growing, and they are struggling, while those at the top are making more money than ever. Biden wants to help the American economy grow, so the middle class can as well.
- Getting Rid of Student Loan Debt – Student loan debt is at higher numbers than ever, and with students graduating from college, unable to find a well-paying job in their field, they are burdened with this debt. Many are not able to buy houses or new cars, both of which help move the economy forward. In order to help these students, Biden pledged during his campaign to relieve a portion of their debt.
- Assisting Rural Communities – Rural communities have been hit hard by several things, from a lack of jobs in manufacturing centers and mining to the opioid pandemic. Financial recovery is hard for people living in these areas, due to the fact that they do not have many of the trappings of modern civilization, such as high-speed internet. Biden wishes to increase the amount of broadband internet in these areas, as well as provide funds for farmers, create agricultural research opportunities, and bring back low-carbon manufacturing centers.
- Improving Infrastructure – The infrastructure of the United States, such as bridges, highways, and other nationally-owned and maintained roadways, is in need of repair. As part of his economic plan, Biden wants to improve this infrastructure, providing a number of jobs in the process. This is an important part of the current budget bill that is going through congress.
- Slowing Climate Change – Climate change is a huge problem that Biden wants to deal with while at the same time, helping create jobs in the United States. By increasing the number of green electrical centers, like those that run on wind or solar power, enticing homeowners and business owners to upgrade to these environmentally friendly options, and getting gasoline powered vehicles off of the roads in favor of electric or alternative fuel vehicles, the President plans to slow down climate change as much as possible. His climate plan also includes things like capping spent gas wells, halting drilling in national parks, and reclaiming former mines.
- Increasing Products That Are Made in America – These days, it’s hard to find something new in the store that’s labeled “Made in America.” Most manufacturing takes places overseas, in places like China, where the costs are lower. Biden wants to create more products that are made in the United States, including technological advances in artificial intelligence, eco-friendly products, and more.
These are just a few of the many plans that Biden has in place. Some are part of the current plan, while others are still on hold, waiting to see how things work out in the future.
More Money for the IRS
In addition to containing parts of Biden’s overall economic agenda, the current budget bill also provides money for the IRS. In fact, a whopping $80 billion dollars are included in the bill for the IRS alone. This money will go towards performing audits and uncovering people, particularly those in the upper classes, that are submitting dishonest tax returns and hiding funds in overseas accounts in order to avoid paying taxes on them. It’s believed that the money earmarked for the IRS will be worth it, as the amount that they will recover in taxes will be double or even triple that money spent.
How Does the Process Work?
In order for parts of Biden’s economic agenda to go through, they needed to be included in the next budgetary bill. These bills are necessary, as they often include a provision that raises the government’s debt ceiling and keep the government funded and up and running. For this to pass, the bill needs to be written up and then put through several different committees before it’s voted on.
Currently, the House Ways and Means Committee has approved the portion of the bill that allows for taxes to be raised. Then, it goes to the House Budget Committee, which gathers that part of the bill and the others before voting on it. If it passes, then the entire House of Representatives must vote to pass the bill with a majority before it heads to the senate.
Once the senate passes the bill, it can be made official, when it’s signed by the President. At this point, the bill becomes law and all of the provisions in it are legal and must be enacted upon. In order to raise taxes, this must take place. If the bill changes at all or isn’t passed by the house or senate, then it essentially dies in committee.
How Much Will Taxes Rise?
Raising taxes is always fraught with difficulty. No one enjoys being told that they owe the IRS more money than before. Currently, the bill includes changes to the top corporate tax rate, as well as the top individual tax rate. There is also going to be a surcharge on a person’s individual income that also includes a capital gains tax.
Let’s break it down a bit:
- Federal Corporate Income Tax Rate – This tax is paid by businesses that are incorporated as a C-corporations, or other companies structured in a different way that need to pay federal income tax. According to the Ways and Means Committee, this rate will go up by 5.5 percentage points. This will make the federal corporate income tax rate 26.5%.
- Top Individual Tax Bracket – The tax brackets for individuals consist of a number of different levels. Currently, only those in the uppermost level will be affected by this change and will see their taxes go up. The bill includes an increase of 2.6 percentage points for people in this tax bracket. This means that they will be taxed at a rate of 39.6%.
- Additional Taxes – On top of the changes that are proposed for those in the top individual tax bracket, there are some additional ones as well. The bill plans to put a capital gains tax into place at a rate of 25%. There will also be a surcharge placed on a person’s individual income if they make more than $5 million dollars a year. This surcharge will be 3%.
Essentially, Biden wants to raise the taxes paid by corporations and high net worth individuals in order to pay for this economic plan. Why did he single out these groups?
Why Does Biden Want to Raise Taxes?
Although part of the reason why Biden wants to raise taxes is clear, since that money is needed to pay for infrastructure improvements and some of the additional plans that he wants to put into place, there’s another, less obvious reason as well. During some of his campaign speeches, Biden pointed out that the federal minimum wage hasn’t changed in the last ten years, leaving some people making less than $8 an hour, while others have made countless billions. By making the wealthy pay more in taxes, Biden has a chance to change some of the wage disparities in the country, while improving things for everyone.
Contact Us Today
If you are worried about the potential increase in either your business or personal taxes and want to ensure that your company is paying the correct rates, then reach out to the tax advisors at Enterprise Consultants Group. We can answer your questions, discuss your rights, and provide actionable options. Please contact us online or at (800) 575-9284 today to schedule a free and confidential consultation to see how we can help you.
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