Broad themes of the president’s agenda include providing tax relief to individuals and tax credits to businesses that engage in desired activities, while the status of expiring TCJA provisions and tariffs seems uncertain.
While the Biden campaign is certainly focused on increasing taxes on U.S. businesses and high-income earners, it is important that policymakers also understand what that reversal might do to U.S. competitiveness, and the competitive global environment in which U.S. companies and U.S. workers operate.
President Biden and Congress should concentrate on areas of common ground, finding incremental places to improve the tax code. A bipartisan bill recently introduced to help retirement savings is a good model for what incremental reform may look like.
While there are many tax changes built into the tax code over the coming years for individuals and businesses, the recent claim that lower- and middle-income Americans may see a “stealth tax increase” in 2021 due to the Tax Cuts and Jobs Act (TCJA) is untrue.
Any additional relief to address a temporary economic crisis should be temporary, targeted toward those most in need, and consistent with good long-term tax policy.
The IRS recently announced the extension of tax filing and payment deadlines from April 15th to May 17th to help taxpayers navigating the many tax changes amid the pandemic and give the IRS opportunity to clear its backlog of tax returns and correspondence.
The House Ways and Means Committee measures would further extend the relief measures created by the CARES Act and the Consolidated Appropriations Act of 2021, and would go further by significantly expanding existing tax credits and making changes to the international tax system.
The increase in expenditures associated with COVID-19 relief is another illustration of using the tax code to administer social spending.
The economics is clear: If Biden wants to maximize the economic benefits of his $3 trillion in new infrastructure spending, he should cut $3 trillion in other government spending to pay for it.
As increased political attention focuses on the state of the American worker, expect to see a resurgence of the argument that the labor share of income is in decline.