Top Biden aide highlights upcoming tax showdown with GOP over 2017 cuts that are due to expire

WASHINGTON — The Biden White House wants voters to know its differences with Republicans on taxes, with a top aide advocating higher rates on corporations and the ultra-wealthy.

Lael Brainard, director of the White House National Economic Council, will deliver remarks at the Brookings Institution on Friday about the major tax challenge for whoever wins November’s presidential election.

Many of the 2017 income tax cuts signed into law by then-President Donald Trump are set to expire after next year. If all tax cuts expire, the vast majority of American households would see their payments to the IRS increase. But if all the tax cuts are extended, they would add another $4.6 trillion to the national debt over the next decade, according to the Congressional Budget Office.

Trump, a Republican, says tax increases would destroy the U.S. economy. But President Joe Biden, a Democrat, wants to expand tax cuts for the middle class while raising taxes on highly profitable corporations and the wealthiest swath of Americans.

“The expiration of Trump’s 2017 tax package next year will put tax fairness front and center,” Brainard plans to say, according to draft remarks obtained by The Associated Press. “The president is making good on his ironclad pledge not to raise taxes on anyone making less than $400,000, and will further cut taxes for workers and families, paid for by asking corporations and those at the top to contribute more.”

In the draft of her speech, Brainard says the 2017 tax cuts did not deliver the growth Republicans promised. She argues that they let wealthy households play by their own special rules, allowing them to pay lower rates than many people with middle-class incomes.

Her speech uses variations on the word “fair” 16 times, in a clear attempt to raise awareness of the issue as many voters focus more on inflation, immigration and foreign policy as key policy challenges facing the country.

Trump has argued that expiring all his tax cuts would lead to mass layoffs that could permanently cripple the economy. His comments reflect a belief that growth comes from the choices companies and wealthy investors make, while Biden is betting that growth comes from the spending of middle-class households that feel financially more secure.

Trump’s 2017 overhaul lowered the corporate tax rate to 21%, aiming to make it more internationally competitive. The law also temporarily reduced the income taxes paid by most American households, in part by lowering marginal tax rates and increasing the standard deduction.

As a result of these changes, the nonpartisan Tax Policy Center initially estimated that a family in the 40th to 60th percentile of earners would save an average of $930 per year. But someone in the top 1% would get back $51,140 and those in the top 0.1% would save $193,380.

While Biden has said he only wants higher taxes on the wealthy and corporations, Trump is telling his supporters at rallies that his Democratic rival would raise everyone’s taxes.

The Republican claims that high inflation under Biden as the country recovered from the coronavirus was the equivalent of a tax increase, a tax increase that he says would only worsen if Biden remains in the White House.

“Biden wants to raise taxes on top of that (inflation) and raise corporate taxes, which will lead to the destruction of your jobs and, you know what, ultimately it will just lead to the destruction of the country,” Trump said.

Yet Trump also favors some massive tax hikes, having imposed a 10% annual tariff on about $3 trillion in imports.

A March analysis from the liberal Center for American Progress estimated that companies would pass the tariffs directly on to their customers, causing an average family to pay $1,500 more per year, a de facto tax increase.

Moreover, extending all of Trump’s tax cuts, which expire at the end of next year, would come with a significant price tag.

In a report Wednesday, the Congressional Budget Office estimated it would add another $4.6 trillion to budget deficits through 2034. That amount includes the additional interest paid on the higher national debt.

Brainard said in her speech that Biden’s tax plan reflects his commitment to “fiscal responsibility.” Still, it is not clear how he can reduce the deficit as much as advertised in his budget proposal for next fiscal year.

Biden’s plan earlier this year assumed that all of Trump’s tax cuts would expire. That means it doesn’t include the cost of extending tax cuts for those making less than $400,000, a promise that could erode most of the $3.2 trillion deficit reductions in his plan.

“President Biden is trying to have it both ways,” said Brian Riedl, a senior fellow at the Manhattan Institute and a former Republican congressional aide. “On the one hand, Biden says he will end Trump’s tax cuts and claim any resulting deficit reductions. But on the other hand, he says he won’t let the tax cuts end for the bottom 98%. And they contradict each other.”

Republicans could also face the challenge of continuing the 2017 tax cuts without putting the government’s finances in worse shape.

The prospect of higher debt means lawmakers may have to implement potential spending cuts, said Paul Winfree, former deputy director of the Domestic Policy Council during Trump’s presidency. Higher debt levels could lead to higher interest rates, which would flow to consumers in the form of more expensive mortgages and car loans.

“I just don’t know how we can talk about extending all the cuts without also cutting spending,” said Winfree, president and CEO of the Economic Policy Innovation Center, a think tank. “If the federal government continues to spend money at this rate, it will put continued pressure on interest rates.”