In a State of the Union speech following a year of closely-watched, unsuccessful Capitol Hill wrangling to make high earners and corporations pay more taxes in order to fund social spending programs, President Joe Biden kept up his talk on taxes Tuesday night.
He urged an extension of the Child Tax Credit payments as one part of the way to give low- and middle-income families some financial breathing room in a time of high inflation.
The president kept up his critique of the tax code being tilted towards the rich and corporations, reiterating a pledge not to raise taxes on anyone making less than $400,000 a year.
“I may be wrong, but my guess is if we took a secret ballot in this floor, that we’d all agree that the present tax system ain’t fair. We have to fix it,” Biden said. “I’m not looking to punish anybody. But let’s make corporations and wealthy Americans start paying their fair share.”
“‘I’m not looking to punish anybody. But let’s make corporations and wealthy Americans start paying their fair share.’”
— Joe Biden’s State of the Union address
He elicited Republican groans and boos when he slammed Trump-era tax cuts that, he said, mostly helped the rich.
And then, except for several other passing mentions, that was pretty much it on taxes during a State of the Union address that focused more on red hot price inflation, Russia’s Ukraine invasion and moving past the pandemic.
The hourlong address may have only been sprinkled with tax talk, but don’t mistake the mentions as Biden putting taxes lower on his to-do list, some observers said Wednesday.
“We were wondering whether there would be any specific references to tax provisions. There were,” said Jennifer Acuña, principal in KPMG US’s federal legislative and regulatory services group. “I think that means tax is very much part of the discussion,” she said.
Emily DiVito, senior program manager for the left-leaning Roosevelt Institute’s corporate power program, said, “To me, it sounds like a president who is still intent on making a tax code that’s fair and more just.”
Others see it differently.
Except for a passing reference on using more tax revenue to close deficits instead of funding programs, Howard Gleckman, senior fellow at the Tax Policy Center, said he didn’t hear anything new during the speech.
Biden’s tax talk was more than “lip service” Gleckman said — but still, “A lot of things have taken over. Not only is Congress stuck on finding consensus on Build Back Better, but a lot of other things have got in way.”
“‘I am really encouraged by the tax wrangling that happened last year. We’re getting close to these reforms.’”
— John Gimigliano, KPMG US’s principal-in-charge for its federal legislative and regulatory services group
“I don’t read anything into it other than he’s captive of circumstances, which seems to happen to presidents,” Gleckman said.
The speech follows months of back-and-forth negotiations last year among Democratic lawmakers to get Biden’s Build Back Better proposal through Congress with razor-thin majorities.
A higher 39.6% top income-tax rate, a steeper capital-gains rates for millionaires matching the higher 39.6% top tax rate, and a higher corporate-tax rate were some of the tax-rule changes on the table, at least at certain points in the negotiations. Centrist Democratic Senator Joe Manchin of West Virginia dealt a crucial blow in December when he said he couldn’t support the bill in its current form.
Biden has previously said he will try to see what pieces of the bill he can get through Congress.
No matter where tax changes come in Biden’s to-do list, it’s very much an open question if any tax law changes get passed during 2022.
“I think it’s been pretty remote since Build Back Better blew up at end of December,” Gleckman said.
When Biden talked Tuesday about raising taxes for wealthy Americans, John Gimigliano, KPMG US’s principal-in-charge for its federal legislative and regulatory services group, said it could still be single pieces, or an array of tax moves that were part of Build Back Better act.
That could include tightened rules on certain taxpayers with business or investments stakes, a broader application of the 3.8% net investment income tax and/or the surtax on households making over $10 million and $25 million, he said.
“We presume it does not mean going back to the original Biden plan of raising the capital gains rate to 39.6% or ending the tax basis step up of capital gains at death. But the president wasn’t specific to any of these points so it’s just a guess,” he said.
Though Biden did talk about more corporate taxation, Gimigliano noted he didn’t specifically talk about raising the rate from its current 21% rate to 28%, the rate Biden initially pushed for. That was “an acknowledgement that it is not currently possible given the narrow margins in Congress,” Gimigliano said.
The Build Back Better proposal is “a monumental proposal to change the tax system. The question is, can it get done in the months that we have before the mid-term election?” Gimigliano said, later adding, “At some point, the window for opportunity will just simply close.”
But DiVito isn’t sure the window will shut close. “I am really encouraged by the tax wrangling that happened last year. We’re getting close to these reforms in a way that previous years seemed like such a long shot. … When it happens, I take a long view.”