President Biden plans to use his first address to a joint session of Congress Wednesday to unveil his second massive tax-and-spend proposal aimed at expanding access to education and social welfare programs, financed largely by imposing tax hikes on high-income Americans.
Dubbed the “American Families Plan,” the $1.8 trillion proposals follows the $2.3 trillion “American Jobs Plan” infrastructure plan Biden introduced last month, making the cumulative price tag of the two-part infrastructure and spending packages surpass over $4 trillion. Biden will detail the second phase during the prime-time address to a scaled-down crowd of Congress with his goal of redefining the role of the federal government as being the driving force for economic growth and shaping the economy that is currently rebounding at a high despite the pandemic.
The $1.8 trillion proposal includes $1 trillion in new spending is aimed at financing federal social programs such as expanding affordable child care, free education, and federal paid leave program with $800 billion devoted in tax credits in federal efforts to expanded Obamacare subsidies and tax credit efforts to fight poverty.
“The American Families Plan is an investment in our children and our families — helping families cover the basic expenses that so many struggles with now, lowering health insurance premiums, and continuing the American Rescue Plan’s historic reductions in child poverty,” the White House 15-page fact sheet briefing document states.
The $1 trillion federal program investments include $512 billion dedicated to education, specifically $200 billion for free universal preschool for all 3-and 4-year-olds, and $109 billion in free community college to all Americans, with Biden also allowing illegal immigrants called Dreamers access to enroll. It also provides $80 billion investments increasing financial aid for low-income students, as well as Dreamers to be awarded $1,400 Pell Grant award, $62 billion grant program investment in colleges serving a majority of low-income students, $46 billion investment in HBCUs, TCUs, and MSIs and $14.4 billion devoted to boost teachers diversity, pay for teachers earn-in demand credentials and paid teaching residency programs.
The other half of the $1 trillion provides $225 billion for child care, including a subsidy that would cap expenses for most workers at 7 percent of income. The plan also calls for $225 billion to subsidize guarantee 12 weeks of paid parental, family, and sick leave that would provide workers up to $4,000 a month as well as $45 billion investment on expanding food stamp (SNAP) eligibility, allowing formerly incarcerated individuals with drug-related felonies re-entry to obtain food stamps and expand on school food programs by re-launching former First Lady Michelle Obama failed healthy school meal initiative.
On the $800 billion going towards tax credits, Biden is looking to extend parts of his $1.9 trillion COVID “American Rescue Plan,” including a $200 billion investment on making ObamaCare insurance premiums reductions permanent. The plan would also extend Child Tax Credit expansion by expanding $2,000 first enacted in the ARP per child six years old and above to $3,000 and $3,600 per child for those under the age of 6.
White House officials have yet to give the economy a chance amid the pandemic, instead claiming the latest two infrastructure and jobs proposals by imposing tax hikes on the wealthy are necessary to meet what they say is persistent problems. Former Chicago mayor and President Obama Chief-in-Staff Rahm Emanuel admitted these programs universal raises the cost of the spending plan, but it is necessary to help the Biden White House maintain and gain new political support.
“Once everyone’s in, all the parents want it. Then it’s not a poor person’s program or a poverty program. It’s an educational program,” Emanuel said. “That to me, that is essential. It changes the public center of gravity once it’s for everybody.”
Biden is also proposing doubling the top capital gains tax rate, increasing from the current base rate of 20 percent to 39.6 percent on capital income over $1 million. The new 39.6 percent top rate coupled with the existing surtax on investment income means that federal tax rates could be as high as 43.4 percent. For high-tax states like New York and California, rates on capital gains could be above 50 percent. The combined state and federal capital gains rate for New Yorkers could be as high as 52.22 percent, while for Californians, it could go as high as 56.7 percent.
White House officials believe the capital and income tax hike can raise as much as $700 billion by increasing IRS enforcement and compliance. The plan proposed to devote $80 billion in funding boost for IRS audits and additional resources to prevent those making millions avoid tax laws or escape from using loophole exemptions by ending the practice of “stepping-up.”
Congress is still currently negotiating and drafting Biden’s $2.3 trillion infrastructure bill — which includes $620 billion on transportation infrastructure, $400 billion towards elderly and disabled home care while also increasing the pay of the workers who provide that care, $580 billion in research and development, manufacturing, and training, and $650 billion on electric grid improvements, broadband internet access, and water systems. The first proposal would be funded by raising the corporate tax rate from 21% to 28%, reversing Trump’s 2017 tax cuts, as well as raising taxes on multinational corporations with a variety of measures to tax profits earned overseas from foreign organizations.
With no Republicans supporting the proposal they see would add to the deficit, Democrats face a difficult path needed to secure the 60 votes required to pass unless they take the drastic steps in removing the filibuster.