US President Joe Biden’s proposed plan to raise the corporation tax from 21% to 28% is causing a stir in the markets. The President’s budget also seeks to impose a 25% billionaire tax and levy high taxes on rich investors. Furthermore, his budget proposal suggests imposing 39.6% taxes on income exceeding $400,000. Biden has taken to Twitter to emphasize the importance of the rich paying their fair share so that the millions of workers who helped build that wealth through Medicare can retire.
On March 8, 2023, President Joe Biden tweeted that he would be presenting his 2024 budget in a move to build on the progress made over the past two years. He stated that his budget is lengthy and urged his followers to text him, with the word “Budget” at (302) 404-0880, to receive regular updates of the essential investments made.
Biden’s budget plan has caused softness in US stocks futures as investors process the impact of the suggested tax changes on businesses, investors, and the economy. In this article, we will explore Biden’s proposed tax policies and their potential implications for the US economy.
Proposed Tax Policies
President Biden’s economic plan contains numerous tax proposals aimed at increasing revenue to support the ambitious spending plans. Apart from the corporation tax hike and the taxes on the billionaires and the rich investors, he also called for a minimum tax of 15% on corporate profits made by America’s largest companies on their book income to prevent them from using loopholes to avoid taxes. This move targets companies with profits of over $2 billion, including the tech giants.
Another proposed tax policy is the elimination of tax breaks for fossil fuels, resulting in petroleum producers and distributors losing most of their tax benefits. Moreover, the tax policy plan requires financial institutions to disclose the cryptocurrency transactions of clients with accounts over $10,000. Small businesses with less than $400,000 in annual revenue are exempted from this policy.
Additionally, Biden’s budget proposed giving the IRS an additional $80 billion to help with reforms and raise its budget to $13.2 billion. This proposed budget plan would enable the IRS to perform more efficient audits by investing in evolving technologies and hiring more agents to investigate the wealthy and the businesses with high earnings.
Implications to the US Economy
The proposed tax changes’ impact on the economy brings both benefits and drawbacks. The proposed corporation tax hike could lead to an increase in the cost of goods as businesses seek ways to offset the additional tax expenses. The proposed tax policies’ goal is to increase government revenue and encourage companies to move their production back to the US. This policy could increase job opportunities, boost US manufacturing, and reduce reliance on foreign products.
Raising taxes on income over $400,000 might discourage wealthy individuals from investing in America, which could lead to a reduction in the overall economy. The proposed minimum tax of 15% for large corporations could reduce their profits, which could negatively affect their stocks’ performance, leading to a reduction in investors’ returns.
Eliminating tax breaks for fossil fuels and encouraging clean energy policies could lead to sustainable economic growth and the creation of green jobs. Simultaneously, companies involved in polluting the environment, like petroleum producers, could suffer from tax hikes and reduced demand for oil-based products.
Financial institutions’ requirement to disclose cryptocurrency transactions, on the other hand, could encourage transparency, accountability, and overall compliance. This policy would also prevent individuals and entities from exploiting cryptocurrencies to evade taxes and launder money.
Conclusion
President Joe Biden’s budget plan seeks to raise revenue through a series of tax proposals that target large corporations and wealthy individuals. The proposed policies aim to fund government programs while boosting the US economy by increasing job opportunities, reducing reliance on foreign products, and promoting clean energy policies. While these policies have benefits, some could lead to a reduction in overall economic growth, negatively affecting the stocks and the investors’ returns of companies affected by the tax changes. However, it is essential to keep in mind that these proposed tax policies still require congressional approval and could change during the legislative process.
