President Biden on Wednesday will present a $1.8 trillion spending proposal that boosts federal funding for an array of social programs, including child care, pre-K, community college and health insurance subsidies.
The plan includes approximately $1 trillion to boost spending on social programs and $800 billion for tax cuts and credits intended to primarily benefit low- and middle-income families.
To pay for the “American Families Plan,” which Mr. Biden is set to detail before a joint session of Congress, the president wants to hike taxes on the wealthy and investors and beef up the IRS to go after high-income tax dodgers, among other tax changes.
“In the broadest sense, these are generational investments in our future — in the future of our families and the future of our kids,” a senior administration official told reporters on a call previewing the plan. “I think we’d like to see it passed as soon as possible.”
The White House estimated that proposal, which doles out most of the spending over a 10-year period, will balance over a 15-year period when combined with Mr. Biden’s $2.3 trillion infrastructure package and accompanying corporate tax increases.
The major spending provisions include:
• $225 billion for child care.
• $225 billion for national paid family and medical leave.
• $200 billion for a permanent extension of expanded Obamacare subsidies in Mr. Biden’s $1.9 trillion coronavirus relief package.
• $200 billion for free universal pre-K for 3- and 4-year-olds.
• $109 billion for two years of free community college.
The plan envisions federal-state partnerships to provide universal pre-K and free community college for two years for all Americans.
The community college benefits would also go to illegal immigrant “Dreamers,” many of whom were brought to the country as young children.
The child care spending is intended to ensure that low- and middle-income families pay no more than 7% of their income on care for children under 5 years old.
The paid leave program would ramp up over time to cover 12 weeks of paid parental, family and personal illness leave after a decade. It would provide workers up to $4,000 per month, with a minimum of two-thirds of average weekly wages replaced.
The broader plan also steers $45 billion toward nutrition assistance for children through school meals and other programs.
The plan says Mr. Biden wants to work with Congress on tying federal unemployment insurance benefits to economic conditions, which Senate Finance Committee Chairman Ron Wyden of Oregon, among others, has been pushing.
The proposal also includes an estimated $800 billion worth of tax credits and cuts, including several extensions of expanded credits in the $1.9 trillion relief package:
• Extends through 2025 an increase in the child tax credit from $2,000 per child to up to $3,600.
• Permanently extends the child and dependent care tax credit expansion; maximum credit rate was increased to 50% of expenses from 35%.
• Permanently extends the earned income tax credit expansion for childless workers; maximum benefit approximately tripled to about $1,500.
The plan would boost funding for the IRS to target large corporations and the wealthy and it would require financial institutions to report information on account flows — a move that could increase the amount of earnings subject to taxation.
“His plan is about cutting taxes for middle-class families, for child care, for health care, and for families,” an administration official said. “And he believes that we should do that in a fiscally responsible way — first and foremost, by making sure the wealthiest Americans actually pay the taxes they already owe.”
The White House estimated that the enforcement changes would generate roughly $700 billion in tax revenue over 10 years.
The plan also increases the top individual income tax rate from 37% to 39.6%. A 2017 GOP tax law had lowered individual rates across the board and lowered the top rate to 37% from 39.6%.
The president’s plan essentially doubles the current capital gains tax rate to the same 39.6% for households earning more than $1 million per year.
Among other tax changes, Mr. Biden also wants to end a practice, known as “stepped-up” basis, that exempts certain capital gains from taxation at death.
The exemption would end for gains above $1 million, or $2.5 million for couples when combined with real estate breaks.
“This reform will be designed with explicit protections so that family-owned businesses and farms will not have to pay taxes when given to heirs [who] continue to run those companies,” an official said.
Congressional Democrats have been pressing Mr. Biden to include proposals to expand Medicare and lower prescription drug prices, among other asks, but those items were not included in the package.
Mr. Biden also did not include a repeal of a $10,000 cap on a prized state and local tax deduction Democrats in high-tax states like New York and California have been pushing for.
“If people have other ideas about how to finance these critical investments, he is open to hearing them,” an official said. “If people have other approaches that they want to put on the table, that’s the process he wants to encourage.”
Republicans have already signaled they will oppose Mr. Biden’s tax hikes, saying they’ll cost jobs and reduce investment at a time when the economy is slowly picking back up after a year of coronavirus-related damage.