Joe Biden

FACT SHEET: The President's Budget Cuts the Deficit by $3 Trillion Over 10 Years

March 11, 2024

President Biden believes that investing in America, growing the economy from the middle out and bottom up, lowering costs for families, and reforming our tax code to reward work and not wealth are economic and fiscal imperatives. Strong and shared growth that benefits all Americans isn't just good for working families and the economy; it will also lead to better fiscal outcomes. At the same time, President Biden believes that long-term investments in our Nation and its people should be paid for. And his Budgets have consistently paid for all of his investments and improved the Nation's fiscal outlook.

The President took office after his predecessor signed into law a reckless and unpaid for tax cut that was skewed to the wealthy and large corporations, adding nearly $2 trillion to the deficit. Compared to when the President took office, the deficit is over $1 trillion lower, thanks in large part to a strong economic recovery and a historic vaccination program that allowed the responsible wind-down of emergency measures. In addition, the President has enacted another roughly $1 trillion in savings over the next decade through the Fiscal Responsibility Act, and through the Inflation Reduction Act provisions that empower Medicare to negotiate lower prescription drug prices, cap insulin at $35 per month for seniors and people with disabilities, and make the wealthy and large corporations pay more of their fair share.

President Biden will fight to stop Republican plans to add trillions to the deficit with tax cuts skewed to big corporations and the wealthy—doubling down on their failed trickle-down tax cuts that already increased the nation's debt by trillions of dollars. Republicans have proposed making all of President Trump's tax cuts permanent, while refusing to pay for them by increasing taxes on big corporations or the wealthy. Instead, they would rather add trillions to the national debt than take back even one dollar of the $150 billion annual rate cut corporations received under President Trump. Their plan would add more than $3 trillion to deficits over 10 years, while providing tax cuts worth $175,000 per year to the top 0.1 percent of Americans that have incomes over $4.5 million.

In contrast to Republicans' plans to increase the deficit, the President's Budget improves the fiscal outlook by reducing the deficit by roughly $3 trillion over the next 10 years by making the wealthy and large corporations pay their fair share, closing tax loopholes, cutting wasteful spending on Big Pharma, Big Oil, and other special interests, and following the Fiscal Responsibility Act. The President's Budget:

Improves the Nation's Fiscal Outlook

The President's Budget improves the Nation's fiscal outlook and reduces long-term fiscal risks by reducing the deficit, stabilizing deficits and debt as a share of the economy over the long-run, and keeping the economic burden of debt within historical norms. Specifically, the Budget reduces the deficit by around $3 trillion over the next decade, compared to deficits without the President's policies. The deficit reduction in the Budget increases over time, with over $500 billion of deficit reduction in 2034.

The Budget also reduces the deficit, as a share of the economy, from current levels. Under the Budget policies, the deficit would decline over the next several years, stabilizing below five percent of the economy throughout the remainder of the 10-year window. And the Budget stabilizes debt as a share of the economy over the long-run as well.

Finally, under the President's Budget, the economic burden of debt would remain in line with historical norms over the next decade. Real net interest as a share of the economy directly measures the cost of servicing the debt: resources that must go towards paying off old debt rather than investing in the future or providing services to Americans now. The Budget forecast takes into account recent increases in interest rates and projects future interest rates in line with private-sector forecasters. Nonetheless, the Budget keeps real net interest payments as a share of the economy at or below the average for the last several decades, around 1 percent of GDP, and well below the 2 percent level of the 1990s.

Reduces the Deficit by Making the Tax System Fairer and Ending Special Interest Giveaways

The President believes that the best way to reduce the deficit is to reform our tax code to reward work and not wealth, ensure that the largest corporations pay their fair share, and end giveaways to special interests. For example, the Inflation Reduction Act he signed into law cracked down on wealthy tax cheats and took critical steps forward in ensuring that large corporations pay their fair share, including a 15% minimum tax on billion-dollar corporations and a surcharge on large, publicly-traded corporations that buy back their own stock.

The Budget builds on this progress and reflects the President's ironclad belief that the wealthy and big corporations should pay their fair share—and that they shouldn't pay lower tax rates than teachers or firefighters.

To date, Republicans in Congress have put forward a much different approach, calling for more than $3 trillion in tax giveaways skewed to the rich and large corporations and handouts to special interests. The budget proposed by the Republican Study Committee (RSC), representing nearly 80 percent of House Republicans, shows how they would pay for those tax cuts: by slashing Social Security, Medicare, the Affordable Care Act, Medicaid, and other programs that drive economic growth and that seniors, people with disabilities, and families count on. The RSC budget would raise the Social Security retirement age, restrict eligibility for Social Security Disability Insurance, slash disability benefits for low-income adults and children with disabilities, and increase healthcare costs for millions of seniors. It also makes drastic cuts to Medicaid, the Affordable Care Act, and the Children's Health Insurance Program, which could result in tens of millions of children and families losing their health insurance.

Instead of making reckless cuts to programs that millions of Americans count on, the President's Budget takes the following steps to reduce the deficit. The President's Budget:

Makes the Wealthy Pay Their Fair Share

Requires Billionaires to Pay at Least 25 Percent of Income in Taxes. Billionaires make their money in ways that are often taxed at lower rates than ordinary wage income, or sometimes not taxed at all, thanks to giant loopholes and tax preferences that disproportionately benefit the wealthiest taxpayers. As a result, many of these wealthy Americans are able pay an average income tax rate of just 8 percent on their full incomes — a lower rate than many firefighters or teachers. To finally address this glaring inequity, the President's Budget includes a 25 percent minimum tax on the wealthiest 0.01 percent, those with wealth of more than $100 million.

Requires Wealthy People to Pay their Fair Share Toward Medicare to Extend Medicare Solvency Indefinitely. The President's Budget extends the solvency of the Medicare Hospital Insurance (HI) trust fund indefinitely by modestly increasing the Medicare tax rate on incomes above $400,000, closing loopholes in existing Medicare taxes, and directing revenue from the Net Investment Income Tax into the HI trust fund as was originally intended, along with savings from Medicare prescription drug reforms. Current law lets certain wealthy business owners avoid Medicare taxes on some of the profits they get from passthrough businesses. The President's Budget closes this loophole and raises Medicare tax rates on earned and unearned income from 3.8 percent to 5 percent for those with incomes over $400,000.

Repeals Trump Tax Cuts for the Wealthy and Reforms Capital Gains Tax to Ensure the Wealthy Pay Their Fair Share. The 2017 tax law lowered tax rates for the wealthiest Americans, delivering an average total tax cut of more than $50,000 for the top 1% and more than $190,000 for the top 0.1% in 2018. The Budget repeals tax cuts for the highest-income Americans, restoring the top tax rate of 39.6 percent for those making more than $400,000 a year. It also proposes taxing capital gains at the same rate as wage income for those with more than $1 million in income, closing the capital gains loophole that allows the wealthy to avoid ever paying tax on their appreciated investments, and finally closing the carried interest loophole that allows some wealthy investment fund managers to pay tax at lower rates than their secretaries.

Ensures That the IRS Can Continue to Collect Taxes Owed by Wealthy Tax Cheats. The Inflation Reduction Act addressed long-standing IRS funding deficiencies by providing stable, multi-year funding to improve tax compliance by finally cracking down on high-income individuals and corporations who too often avoided paying their lawfully owed taxes, and to improve service for the millions of Americans that do pay their taxes. Already, the IRS is using these resources to crack down on tax evasion by the wealthy and big businesses. It has collected more than $500 million in unpaid taxes from fewer than 2,000 delinquent millionaires, is recouping taxes from thousands of millionaires who did not fulfill their basic civic duty by filing a tax return, and is cracking down on high-end tax evasion like deducting personal use of corporate jets as a business expense. At the same time, it is improving customer service and modernizing IT infrastructure. The President's Budget would restore the full Inflation Reduction Act investment and provide new funding over the long-term to continue cutting the deficit by making sure that wealthy Americans and big corporations pay the taxes they owe through tax compliance initiatives and to continue improving service for taxpayers who are just trying to pay what they owe.

Makes Large Corporations Pay Their Fair Share

Raises Tax Rates for Large Corporations. Corporations received an enormous tax break in 2017. While their profits soared, their investment in their workers and the economy did not. Their shareholders and top executives reaped the benefits, without the promised trickle down to workers, consumers, or communities. The President's Budget would set the corporate tax rate at 28 percent, still well below the 35 percent rate that prevailed prior to the 2017 tax law. In addition, the Budget would raise the Inflation Reduction Act's corporate minimum tax rate on billion-dollar corporations that the President signed into law from 15 percent to 21 percent, ensuring the biggest corporations pay more of their fair share. These policies are complemented by other proposals to incentivize job creation and investment in the United States to help ensure broadly shared prosperity.

Cracks Down on Tax Avoidance by Large Multinationals, including Big Pharma. For decades, countries have competed for multinational business by slashing tax rates, at the expense of having adequate revenues to finance core services. Thanks in part to the Administration's leadership, more than 130 nations signed on to a global tax framework to finally address this race to the bottom in 2021. Many of our international partners, including many of the world's largest economies, have implemented or will soon implement this transformational agreement. The President's Budget proposes to do the same by reforming the international tax system to reduce the incentives to book profits in low-tax jurisdictions, stopping corporate inversions to tax havens, and raising the tax rate on U.S. multinationals' foreign earnings from 10.5 percent to 21 percent. These reforms would ensure that profitable multinational corporations, including Big Pharma, pay their fair share.

Denies Corporate Tax Breaks for Million Dollar Executive Compensation. Executive pay has skyrocketed in recent decades, with CEO pay averaging more than 300 times that of a typical worker in 2022. The 2017 tax law's corporate tax cuts only made this problem worse, producing massive boosts to executive compensation while doing nothing for low- and middle-income workers. While corporations can choose to give huge pay packages to their executives, President Biden believes that they don't deserve a tax break when they do. His Budget proposes new policy to deny deductions for all compensation over $1 million paid to any employee of a C corporation, which would discourage companies from giving their executives massive pay packages and help level the playing field across C corporations.

Ends Wasteful Spending to Special Interests

Negotiates Lower Drug Prices and Expands Access to Prescription Drugs. Thanks to action taken by this Administration, millions of seniors and people with disabilities are saving money on their drug costs – including $35 insulin, free vaccines, and out-of-pocket costs capped at about $3,500 starting in 2024. Medicare is also negotiating lower drug prices for the first time ever, starting with ten of the costliest, most widely used drugs used to treat blood clots, cancers, arthritis, diabetes, and more. The Budget builds on this success by significantly increasing the pace of negotiation, bringing more drugs into negotiation sooner after they launch, expanding the Inflation Reduction Act's inflation rebates and $2,000 out-of-pocket prescription drug cost cap beyond Medicare and into the commercial market, and by taking other steps to build on the Inflation Reduction Act drug provisions. In addition, the Budget extends the $35 cost-sharing cap for a month's supply of a covered insulin product to the commercial market. For Medicaid, the Budget includes proposals to ensure Medicaid and the Children's Health Insurance Program (CHIP) are prudent purchasers of prescription drugs, such as authorizing HHS to negotiate supplemental drug rebates on behalf of interested States in order to pool purchasing power. The Budget also limits Medicare Part D cost-sharing for high-value generic drugs, such as those used to treat hypertension and high-blood pressure, to no more than $2 for Medicare beneficiaries. These reforms will not only cut costs for the Federal government by $200 billion; they will also save billions of dollars for seniors and people with disabilities.

Eliminates Tax Subsidies for Oil and Gas. The President is committed to ending tens of billions of dollars of federal tax subsidies for oil and gas companies. Even as they benefit from billions of dollars in special tax breaks, oil companies have failed to invest in production. For the last two years, they have realized record profits, but instead of lowering prices for consumers or investing these funds, they have undertaken record stock buybacks, mergers, and acquisitions that benefited executives and wealthy shareholders. The Budget eliminates special tax treatment for oil and gas company investments, as well as other fossil fuel tax preferences.

Lowers Medicaid Spending by Addressing Excessive Payments to Medicaid Managed Care Organizations. The Budget will lower Medicaid costs by over $10 billion by requiring that insurance companies pay Medicaid back when they charge it far more than they actually spend on patient care. Currently, only about half of states require private insurance companies that provide Medicaid coverage to pay money back when they realize outsize profits. Without this requirement, insurance companies are keeping  millions of dollars each year in excessive payments. The Budget would apply this requirement nationwide, consistent with similar requirements in Medicare Advantage and Affordable Care Act plans. With it, insurance companies will no longer be able to charge for unnecessary administrative expenses or sacrifice quality patient care to increase their profit margins, and if they charge too much, they will have to pay it back to the Medicaid program rather than keeping the profits and, in some cases, making larger payments to shareholders.

Eliminates Tax Subsidies for Real Estate. The Budget closes the “like-kind exchange” loophole, a special tax subsidy for real estate. This loophole lets real estate investors – but not investors in any other asset – put off paying tax on profits from deals indefinitely as long as they keep investing in real estate. This amounts to an indefinite interest free loan from the government. Real estate is the only asset that gets this sweetheart deal.

Eliminates Tax Subsidies for Cryptocurrency Transactions. The Budget eliminates a special tax subsidy for crypto currency and certain other transactions. Right now, crypto investors aren't subject to the same rules of the road that investors in stocks or other securities have to follow, allowing them to report excessive losses. For example, a crypto investor – unlike an investor in stocks or bonds – can sell a cryptocurrency at a loss, take a substantial tax loss to reduce their tax burden, and then buy back that same cryptocurrency the very next day. The Budget eliminates this tax subsidy for crypto currencies by modernizing the tax code's anti-abuse rules to apply to crypto assets just like they apply to stocks and other securities.

Joseph R. Biden, FACT SHEET: The President's Budget Cuts the Deficit by $3 Trillion Over 10 Years Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/370731

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