SOTU: Biden to preview populist second-term economic agenda
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President Biden at last year's State of the Union address. Photo: Nathan Howard/Bloomberg via Getty Images
President Biden during Thursday night's State of the Union address will lay out a distinctly populist vision for what economic policy in his second term would look like.
Why it matters: Next year is set to be a seismic year for U.S. fiscal policy, even if the topic doesn't get covered much, given the stakes of the 2024 election for such attention-grabbing topics as abortion and the future of democracy.
- In Thursday night's speech and in a budget proposal due out next week, the Biden administration will outline a vision for raising taxes on the very wealthy and large corporations and using the funds to support working-class families and reduce the deficit. (A White House fact sheet is here.)
- Many provisions of the 2017 Tax Cuts and Jobs Act, former President Trump's signature tax reform law, expire at the end of next year, creating a hard deadline for Congress and the president to agree on which to extend, which to allow to expire and any new changes.
- The election's outcome — for the White House and both houses of Congress — will determine the balance of power in those negotiations.
For example, the TCJA lowered the corporate income tax rate from 35% to 21%. Biden proposes raising it to 28%. (Trump's campaign has not released a detailed tax plan, but signals from his camp suggest he would seek to extend the lower rate or cut further.)
- A notable new Biden proposal would prevent corporations from deducting employee salaries over $1 million from their taxes. Currently, that prohibition only applies to a handful of top executives.
- The proposal would raise $270 billion over 10 years, the White House said. But it could prove problematic for companies like pro sports franchises and investment banks, where pay for high-salaried workers constitutes a large chunk of operating expenses
The speech will also emphasize a number of ideas that have been part of previous Biden proposals, including requiring households worth $100 million or more to pay at least 25% of their earnings in taxes. They are frequently able to enjoy lower effective tax rates because of how the capital gains tax works.
- Biden will again propose an expanded child tax credit, extending a benefit for families with children that was enacted in 2021 but expired in 2022.
- The tax proposals will be paired with actions to assail corporate behavior Democrats see as greedy — tack-on fees for airfares and hotel rooms, for example, and "shrinkflation" — that are small in macroeconomic terms but which the Biden team is betting will resonate with voters.
