How Would Biden’s Tax Hike Work?

President Biden looks poised to act on a major pillar of his campaign: a federal tax hike. This effort will be even more colossal than the recent $1.9 trillion Covid-19 relief bill. Here’s what we know so far about how Biden’s tax legislation might impact Americans:

  • It is focused on the wealthy: “One of the objectives of Joe Biden’s tax plan, clearly, is to increase the amount of taxes wealthy Americans pay without imposing a new tax on Americans’ wealth. By this standard — and a few others for which economic conservatives can be grateful — it succeeds.” — Karl Smith
  • It could be a once-in-a-century opportunity to fix capitalism: “The U.S. needs to reclaim the kind of capitalism that existed before the 1980s, when the financialization of American business — and the belief that Wall Street was the only thing that mattered — began. And maybe, just maybe, the experience of the pandemic can help show the way.” — Joe Nocera
  • It might hold back the economy: “Biden credibly threatens to take a tax code that is already steeply progressive and make it even more progressive, with nearly all of the increased tax burden falling on the top 2% of taxpayers. That’s a problem for a couple of big reasons. For one, it would clearly discourage savings, investment, and business formation, potentially causing lasting economic damage.” — Jared Dillian
  • Use taxes to save the environment: “Econ 101: If you tax something, you get less of it. So let’s tax something we want less of, like pollution. Income taxes mean less income, which means less work, saving and investment. So let’s tax consumption rather than income.” — Michael Strain
  • Don’t use them to fund an infrastructure bill: Unfortunately, Senator Joe Manchin of West Virginia, a powerful centrist who could cast the decisive vote, has declared that any infrastructure bill should be financed by tax increases rather than by further deficits. That's exactly the wrong approach...a transformational green infrastructure push is just the kind of thing we should be borrowing to fund. Not only is it a one-time expense, but it will yield an economic return in terms of cheaper energy that boosts the private sector for many decades to come.” — Noah Smith
  • And how about just collecting $1 trillion that is already owed?: President Biden faces a quandary: How can he reform the federal tax apparatus to raise government revenue? “One promising option: Give the Internal Revenue Service the resources needed to ensure the wealthiest are paying the taxes they already owe.” — Natasha Sarin

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Bloomberg Opinion provides commentary on business, economics, politics, technology and markets.

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