The battle lines of the next big tax fight were laid out on Tuesday as Treasury Secretary Janet L. Yellen sparred with Republicans over the Biden administration’s plans to raise taxes on businesses and wealthy Americans.
In recent weeks, Republicans have been amplifying their attacks on President Biden’s tax proposals, which have become central to the president’s re-election message. Many provisions in the $1.7 trillion tax cut that Republican lawmakers and former President Donald J. Trump enacted in 2017 are set to expire in 2025, including lower tax rates for individuals as well as many tax breaks for corporations.
Lawmakers are girding for a legislative battle over which ones — if any — will be extended next year. Renewing all of the tax measures for another decade would cost about $3 trillion, according to the Joint Committee on Taxation.
Republicans have begun warning that Mr. Biden plans to allow all of the tax cuts to expire, effectively raising taxes on businesses and families at a moment when inflation is pinching consumers.
“Instead of allowing families hit by these high prices to keep more of their hard-earned money, President Biden wants the highest tax increase on families and small businesses in American history,” Representative Jason Smith, Republican of Missouri and the chairman of the House Ways and Means Committee, told Ms. Yellen during a hearing on Tuesday.
The president fueled such criticism last week when he assailed the Trump tax cuts for benefiting the rich and increasing the federal debt and promising: “The tax cut is going to expire. If I’m re-elected, it’s going to stay expired.”
But on Tuesday, Ms. Yellen insisted that Mr. Biden would keep his promise to not raise taxes on Americans who earn less than $400,000 a year if he wins a second term.
“The president has been very clear that no family earning less than $400,000 will face a tax hike,” Ms. Yellen said.
Referring to the 2017 Tax Cuts and Jobs Act, she added, “He has not proposed such a thing since he took office, and he’s not proposing to allow that to happen when parts of T.C.J.A. expire.”
The budget proposal that Mr. Biden released in March called for $3 trillion in tax increases that would go toward lowering the deficit and paying for other Biden administration priorities such as shoring up retirement programs.
Ms. Yellen said on Tuesday that some of the proposed tax increases could offset the costs of extending provisions of the 2017 tax law. She pointed to measures that would raise taxes on stock buybacks, increases in the corporate income tax and corporate alternative minimum taxes, and a new 25 percent “billionaire tax” on individuals with wealth, defined as the total value of their assets, of more than $100 million.
In a sign of the legislative challenge to come, Republicans on the Ways and Means Committee argued that middle-class Americans will still feel the impact of tax increases on businesses, pointing to research that claims workers and consumers bear much of the burden of a higher corporate tax rate. They also dismissed the international agreement on a “global minimum tax” that Ms. Yellen helped broker in 2021 as a giveaway to foreign governments, suggesting that Republicans remained unlikely to provide the votes needed to put the United States in compliance with the pact.
Asked by Representative Michelle Fischbach, Republican of Minnesota, how Mr. Biden would find a way to keep the tax cuts from expiring, Ms. Yellen said the president would work to let the cuts for the rich lapse while preserving the rest.
“There will be a negotiation over what to do when these tax cuts expire and the president, as he does in many other situations, will negotiate with Congress,” Ms. Yellen said.
The contours of the coming tax changes will depend heavily on the political makeup of the House and the Senate and who wins the presidency. Ms. Yellen acknowledged that Mr. Biden has not yet finalized all the details of his tax plan, but criticized the Trump tax cuts for failing to stimulate much business investment and for overwhelmingly benefiting the rich.
Mr. Trump said this year that if elected, he would enact “the biggest tax cuts” and a “brand-new Trump economic boom.”
Source Agencies
