President Biden on Wednesday rolled out the blueprint for another massive tax-and-spend bill, dubbed the American Families Plan, which would boost federal spending by $1.8 trillion through tax hikes on high-income Americans and investors.
The package includes $511 billion for education, including universal preschool for 3- and 4-year olds and free community college, and $225 for childcare, including a subsidy that would cap expenses for most workers at 7 percent of income. The plan calls for $225 billion to subsidize 12 weeks of paid parental and sick leave and $45 billion more for food stamps and school food programs.
About $800 billion would go toward tax credits, including $200 billion for Obamacare users. The plan would make permanent the recent expansion of tax credits for people with children — from $2,000 per year to $3,000, or $3,600 for children under age six.
But in a major blow to New York-area Democrats including Gov. Andrew Cuomo, the proposal omits repeal of the 2017 SALT deduction cap of $10,000 per person, which hammered residents of higher-tax states by preventing them from deducting state tax payments on their federal tax returns.
Cuomo has used the possible repeal of the SALT cap to justify pending New York state tax hikes on businesses and the wealthy.
Rep. Tom Suozzi (D-NY) and two New Jersey Democrats — Josh Gottheimer and Bill Pascrell — said they won’t vote for the final package if it doesn’t repeal the SALT cap, which in effect raised taxes on many New Yorkers by limiting the state and local taxes that could be deducted before paying federal taxes.
The massive “families” proposal would be paid for by significant tax hikes on the highest income bracket — from 37 percent to 39.6 percent for individual filers earning more than $523,000 or joint filers over $628,000 — and on investments like stocks and real estate.
The top capital gains tax rate would increase to 39.6 percent for people with annual incomes over $1 million, which would be a dramatic increase from the current top rate of 20 percent. For New Yorkers, the combined state and federal capital gains rate could be as high as 52.22 percent.
The plan also proposed more IRS audits on the wealthy to crack down on tax avoidance by increasing tax audits — though a projected windfall of $700 billion over 10 years is likely to receive skepticism from Republicans.
A senior administration official stressed to reporters that Biden only wants more dreaded tax audits for the wealthy and not the middle class.
“In America today, taxpayers are more likely to be audited if they live in the Mississippi Delta than if they live on Park Avenue. The president’s plan would change this,” the official insisted.
“Audit rates for Americans making less than $400,000 a year would not increase relative to recent years. The focus of these steps will be to focus additional capabilities and resources on large companies, businesses, estates and higher income individuals.”
It’s the latest in a trio of massive bills that Democrats are expected to try to ram through Congress with little or no Republican support if they can manage to avoid defections from centrists like Sen. Joe Manchin (D-W.Va.) in the evenly divided Senate.
Last month, Congress passed Biden’s $1.9 trillion COVID-19 stimulus bill — including $1,400 in stimulus checks to most people and $350 billion in state and local aid — without any Republican votes via a budget reconciliation process that bypasses the usual 60-vote threshold for bills to pass the Senate.
Congress is still drafting Biden’s proposed $2.3 trillion infrastructure bill — which would include about $400 billion for home health care and nearly $200 billion in electric vehicle subsidies. It would be paid for by raising corporate tax rates, though hikes associated with the “families” plan also have been discussed as part of this bill.
The infrastructure and “families” plan can pass separately under budget reconciliation thanks to a recent Senate parliamentarian ruling that gave Democrats two more opportunities this year to use the special rules.
But the tax hikes and specifics of spending are likely to be subject to protracted wrangling on Capitol Hill. Democrats hold a six-vote advantage in the House, meaning Suozzi and his allies have the power to stall the newest package over the SALT deduction if they hold firm.