President Joe Biden makes remarks as he discusses his Budget for Fiscal Year 2024 at the Finishing Trades Institute, Philadelphia, Pennsylvania on Thursday, March 9, 2023.
Saquan Stimpson – CNP / MEGA
President Biden’s budget request is meant to drive headlines showcasing a claimed $3 trillion in deficit reduction over the next decade.
In reality, his budget proposes the largest tax increase in modern history, plows much of the new savings into more new spending and leaves Social Security on its path to insolvency.
Start with taxes.
Inflation-adjusted federal revenues have already soared to $1 trillion above pre-pandemic levels, to their second-highest share of the economy since World War II.
Yet the president would raise taxes by an additional $5 trillion over the decade — the largest tax hike since the 1960s.
Total revenues would approach 20% of the economy, and income-tax revenues would average 10% of the economy over the decade.
Both would represent the highest sustained tax burdens in American history.
America’s businesses would bear much of the tax burden.
Total corporate taxes would jump by 56%, to their highest sustained share of the economy since the 1970s (and may exceed the 1970s levels when also accounting for small-business taxes).
Much of these revenues would come from raising the corporate tax rate from 21% to 28%.
When including state taxes, American corporations would face the second-highest tax burden among Organization for Economic Co-operation and Development nations.
In a world of global tax competition, America would again hamstring its own competitiveness.
One could defend steep tax increases if accompanied by equal spending savings as part of a balanced plan to combat Washington’s trillion-dollar deficits.
Instead, $2 trillion of these new taxes would go towards new spending initiatives — on top of the $5 trillion in new spending Biden has already enacted.
Inflation-adjusted spending, which was $5 trillion before the pandemic, would nearly reach $7 trillion next year — or $51,000 per household.
Total federal spending would reach 25% of the economy within a decade, a level unseen outside World War II and the recent pandemic.
So the president’s record tax increases cannot keep up with runaway spending.
Even with $5 trillion in tax hikes bringing the highest sustained tax burden America has ever seen, the public-held national debt would still jump from $25 trillion to $44 trillion according to the president’s own figures.
Annual budget deficits would grow past $2 trillion even with peace and prosperity.
Simply paying the interest on the national debt would cost taxpayers $10 trillion over the decade — more than any program besides Social Security and Medicare.
Speaking of Social Security and Medicare, Biden has portrayed himself as the defender of these programs even as their costs soar unsustainably.
Yet not one penny of the president’s $5 trillion tax increase would go towards averting Social Security’s scheduled insolvency in a little more than a decade.
By refusing to offer any Social Security reforms, Biden is essentially endorsing the automatic 20% benefit cut scheduled in just over a decade.
Biden also claims his budget shores up Medicare funding for two decades.
He proposes significant tax increases on upper-income families, investors and small businesses to prop up Medicare Part A (hospital insurance).
But much of the claimed Medicare trust fund improvement comes from simply transferring in existing general funds — a shift between government accounts that saves no money.
The budget also does little to rein in the unsustainable costs of Medicare Parts B and D (the physician and prescription-drug benefits) that push Medicare’s 30-year shortfall to $80 trillion.
Taxpayers may be tempted to shrug off the $5 trillion in new taxes that are targeted mostly at corporations and families earning more than $400,000.
But steep business taxes are ultimately passed on to families through higher prices, lower wages and smaller retirement investments.
And with inflation still burning through the economy and higher interest rates risking a recession later this year, now is not the time for massive and potentially inflationary new taxes on businesses and investors.
Yet this budget proposes an even more direct risk to the middle class.
The pool of “tax-the-rich” revenues is not infinite.
If the president wishes to push corporate and upper-income taxes to their highest sustained levels in large part to fund government expansions, whose taxes will be left to close the remaining $17 trillion in red ink that the president proposes over the next decade?
The more the wealthy taxes finance new spending, the more your taxes must eventually rise to combat the remaining budget deficits.
Biden has proposed a political document meant to generate sympathetic headlines, rather than begin any serious negotiations with Republicans.
More taxes, more spending, $17 trillion in red ink and Social Security insolvency do not represent a serious or responsible proposal.
Brian Riedl is a senior fellow at the Manhattan Institute. Twitter: @Brian_Riedl