Biden Budget Includes Capital Gains Tax Hike


Update (1330ET): President Biden just released the much-leaked and strawman’d Fiscal Year 2022 budget request to Congress on Friday, the first formal budget of his presidency.

The topline budget request for 2022 is $6 trillion. But of this, as we detailed below, only $300 billion is new spending requested for next year. Instead, the vast majority of it will be spent on programs the government is obligated by law to fund, like Medicare, Social Security and interest on the national debt. 

“Put together, this budget is an agenda for robust, durable economic growth and broadly shared prosperity,” said Shalanda Young, Biden’s acting White House budget director.

“It will deliver a strong economy now and for decades into the future.”

On The Retroactive Capital Gains Tax Hike

On the tax front, the biggest surprise in Biden’s proposal is that he assumes an increase in the capital gains rate would be retroactive to April 2021. This would prevent wealthy people from quickly selling off their assets before the end of the year to avoid the hike. Most of the other increases, if approved by Congress, would start on January 1, 2022, according a senior administration official.

Biden’s budget proposes to roll back most of the Trump cuts on the corporate and international side of the tax code, including bringing the corporate rate back to 28% and the top individual rate back to 39.6%.

The proposal allows many temporary Trump tax cuts for individuals and families to simply expire, as they’re already slated to do after the year 2025. But doing so amounts to something of a budgetary gimmick, as it allows Biden to bank the savings from higher tax rates snapping back in place on families making less than $400,000 per year — something he’s vowed not to let happen.

The budget does not address the state and local tax deduction, which may disappoint moderate Democrats from high-tax states that have pushed the White House to expand the deduction that Trump’s 2017 tax overhaul restricted to $10,000.

Additionally, Biden’s budget proposal calls for more than $36 billion to fight climate change.

Budget highlights:

  • Projects a USD 1.84TN deficit in 2022
  • Assumes 4.1% unemployment rate in 2022
  • Sees ‘short-term’ inflation rising above 2% before settling down to 2% annual rate. Sees inflation staying at or below 2.3% through 2031
  • Sees total public debt at 117% of GDP by 2031, reduced from COVID aid highs but still way above historical levels
  • Adds USD 14.53TN to US debt between 2022 and 2031, narrows annual deficits to USD 1.45trln by 2031
  • Sees 10Y TSY averaging 1.2% in 2021, 1.4% in 2022 and 1.7% in 2023
  • Sees the 3M Bill rate averageing 0.1% in 2021, 0.2% in 2022 and 0.4% in 2023
  • CPI is 2.1% in 2021, 2.1% in 2023, and 2.2% in 2023
  • Real GDP 5.2% in 2021, 4.3% in 2022, 2.2% in 2023
  • 10-year deficit window projects US nominal GDP to grow by 42% from 2022 to 2031
  • White House says it would pay for infrastructure and families plans in 15 years
  • Budget boosts state department funding by $5.4BN
  • Projects negative real interest costs in 2021, staying at or below 0.5% of GDP over next decade

In the statement, the president said the document is “a budget for what our economy can be, who our economy can serve, and how we can build it back better by putting the needs, goals, ingenuity, and strength of the American people front and center.”

We suspect the fact that they released this late on Friday before the long Memorial Day break says lots about the various aspects of the bill and the hope it can all be buried beneath the veneer of big spending government here to save us all.

Full Budget Doc here.

*  *  *

As we detailed earlier, there was much excitement in the markets yesterday when the NYT leaked that Biden will propose a $6 trillion budget on Friday. Only… as Goldman’s Alec Phillips explains, the recent headlines around US infrastructure spending and the overall federal budget are vastly overblown and do not represent nearly as much incremental spending as they appear.

For one thing, here is the $6 trillion number in its proper context: according to Goldman, even if Congress makes no further policy changes this year, the federal government is on track to spend $5.6 trillion in fiscal 2022.

Or consider that the latest Senate Republican “compromise” offer of a “1 trillion” (really $928BN) infrastructure proposal counts already-projected spending (i.e., over the next 8 years, the Congressional Budget Office projects highway spending of $400bn and transit spending of $95bn. Senate Republicans propose $506bn and $98bn respectively, an increase of $109bn in those two categories combined) leaving new spending in the proposal at a fraction of what the White House proposes: in total, the Senate Republican proposal amounts to less than $300bn in new spending. By contrast, all of Biden’s $1.7 trillion proposal is new spending, which leaves the two proposals well over $1 trillion apart.

Here are the full details behind all those big numbers being thrown about, courtesy of Goldman

Read the rest of the article here.

Original article posted by Tyler Durnden at ZeroHedge. Title changed by Montana Daily Gazette.


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