© Reuters. FILE PHOTO: US President Joe Biden speaks to the media after attending a closed Senate Democratic Caucus luncheon at the US Capitol in Washington, DC, US. USA, March 2, 2023. REUTERS/Leah Millis
WASHINGTON (Reuters) – U.S. President Joe Biden’s budget for fiscal year 2024 will be released on Thursday. While the document is always a bit of a wish list, and especially given the current divided Congress, the Democratic president’s spending and revenue priorities will be key factors in upcoming negotiations with Republicans on raising the debt ceiling.
This is what you can expect:
Cut almost $3 trillion of the national deficit
Biden will double down on the State of the Union pledge to cut the national deficit, pledging to cut nearly $3 trillion over 10 years, with tax increases on businesses and high income earners.
The US federal deficit totaled $1.4 trillion in 2023, the Congressional Budget Office said.
As part of the effort, the administration said it would launch new initiatives to crack down on pandemic-era spending fraud and other government programs. Biden also wants to increase fines for companies that violate labor laws and divert funds that would have gone toward building federal prisons.
Boost Medicare with taxes
Biden hopes to raise the Medicare tax on income above $400,000 from 3.8% to 5% and expand the federal government’s ability to negotiate drug prices to keep the health care program solvent, the White House said this week.
The White House wants Congress to give the administration permission to negotiate prices for more drugs with manufacturers and allow those negotiations to begin before the drugs hit the market. The budget would also require commercial health insurance plans to provide reimbursements when the prices of some drugs rise faster than the rate of inflation.
Other health care proposals will include increasing access to HIV prevention drugs for people enrolled in Medicaid and requiring insurance plans to pay for that federal program when they spend less on patient care. Gilead Sciences (NASDAQ:)’ Truvada and Descovy are approved in the US for HIV pre-exposure prophylaxis.
repurchases
Biden plans to propose quadrupling the 1% tax on share buybacks that went into effect in January, to encourage companies to invest in their growth rather than boost shareholders.
The White House has said that taxing buybacks levels out a distortion in the tax system. Dividends, he said, are taxable to many shareholders, but share buybacks weren’t taxable until this year. The plan to push the buyback tax may struggle to make headway in the US Congress, where Republicans control the House.
Child care, tax credits
Biden will renew a provision of his COVID 2021 plan that expanded the child tax credit to low-income families and reintroduce plans for federal funding for universal pre-kindergarten.
railway safety
The budget is expected to include millions in new funding for rail safety measures after a series of high-profile accidents and derailments.
Billionaire Minimum Income Tax
Biden is expected to reiterate his call for a 20% minimum tax on homes worth more than $100 million. The White House refers to it as the “minimum income tax for billionaires.”
The tax would ensure that the wealthiest Americans do not pay a lower tax rate than firefighters and teachers, Biden said in his budget proposal last year. Several previous attempts by Democrats to push through such a proposal failed in Congress.
defense spending
The White House is also expected to ask to increase the defense budget by single-digit percentages of the $816 billion allocated this year, according to a person familiar with the matter.
Elimination of tax benefits
Biden will propose cutting tens of billions of dollars in tax benefits currently enjoyed by oil and gas companies, real estate investors, fund managers, wealthy retirement savers and cryptocurrency traders, according to a document seen by Reuters.
The budget will propose ending “special tax treatment” for oil and gas companies and “tax preferences for fossil fuels,” according to the document, which did not provide additional details on that provision.
He would also propose ending the “in-kind exchange” benefit that allows real estate investors to defer some taxes indefinitely. And he renews Biden’s promise to end the “loophole” of accrued interest that effectively allows fund managers to pay a lower rate on their earnings than many salaried workers.
Biden also wants to put a cap on how much people with incomes above $400,000 can have in tax-advantaged retirement accounts. And he would remove a “special tax break” on cryptocurrency transactions that doesn’t extend to stocks.