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Since taking office as the 46th President of the United States on January 20, 2021, Joe Biden has been faced with the gargantuan task of rescuing the US economy from the effects of the COVID-19 pandemic. A significant part of this task is dealing with the country’s massive debt, which has been accumulating over the years.
In March 2021, President Biden unveiled a $2 trillion infrastructure plan that seeks to address the country’s aging infrastructure, create jobs, and further stimulate the economy. However, the deal does not address how these infrastructure investments will be funded. This is where the President’s debt-deal strategy comes in.
Biden’s approach to dealing with the country’s debt is anchored on several measures, one of which is “winning in the fine print.” Essentially, this involves taking advantage of loopholes in existing tax laws to increase revenue while avoiding the need for direct tax hikes.
For example, one of Biden’s proposals is to close the “like-kind” exchange loophole, which allows wealthy investors to defer capital gains taxes by exchanging one property for another. This loophole has been a popular way for real estate investors to avoid paying taxes on their profits. Closing it could raise billions of dollars in revenue for the government.
Additionally, Biden has proposed increasing the audit rate of wealthy individuals and corporations to ensure that they pay their fair share of taxes. According to estimates, increasing the audit rate could bring in as much as $700 billion in additional revenue over a decade.
Biden’s debt-deal strategy also involves raising the corporate tax rate from 21% to 28%, reversing the Trump-era tax cuts that favored corporations and the wealthier sectors of society. By doing so, the government could raise an estimated $1.2 trillion in additional revenue over a decade.
Another prong of Biden’s debt-deal strategy is to encourage other countries to adopt a global minimum corporate tax rate. The idea is to prevent corporations from moving their headquarters to countries with lower tax rates, thereby avoiding paying taxes altogether. The President has proposed a global tax rate of 15%, which could raise an estimated $500 billion in additional revenue for the US government.
The Biden administration’s debt-deal strategy also entails improving tax compliance among small businesses. Biden has proposed investing $80 billion in the Internal Revenue Service (IRS) to improve its capacity to enforce tax laws, including hiring more auditors and modernizing its computer systems.
To further restrict the ability of wealthy individuals to avoid paying taxes, the Biden administration has also proposed increasing the capital gains tax rate for individuals earning more than $1 million per year. This proposal has, however, met with resistance from some Republicans, who argue that it could discourage investment and harm economic growth.
In summary, Biden’s debt-deal strategy is a multi-faceted approach that seeks to raise revenue by closing tax loopholes, increasing tax compliance, and imposing higher tax rates on corporations and wealthy individuals. By doing so, the government hopes to reduce the country’s debt while also funding much-needed infrastructure investments and stimulating the economy.
However, the success of this strategy is contingent on several factors, including the support of Congress, the willingness of corporations and wealthy individuals to comply with tax laws, and the effectiveness of the IRS in enforcing tax laws. Regardless, it is clear that Biden’s administration is committed to tackling the country’s debt problem head-on, and its success could have far-reaching implications for the country’s economy and future prospects.
In conclusion, Biden’s debt-deal strategy is a comprehensive approach to dealing with the country’s debt problem. By closing tax loopholes, increasing tax compliance, and imposing higher tax rates on corporations and wealthy individuals, the government hopes to raise significant revenue that could reduce the debt while also investing in infrastructure and stimulating the economy. While there are challenges ahead, Biden’s strategy represents a bold and focused effort to tackle one of the country’s most pressing economic problems.
