In his State of the Union Address on Tuesday, Joe Biden, the US President will reintroduce his plan to impose a minimum tax on billionaires as well as impose a higher tax on stock buybacks by corporations.
He will renew” his call for Congress’ passage of legislation to ensure America’s wealthiest households pay a minimum 20% income tax. It would also include unrealized gains from investments made with assets such as stocks and bonds.
The White House stated in the factsheet that “this minimum tax would ensure that the wealthiest Americans don’t pay a lower tax rate than teachers or firefighters.” The White House stated that billionaires have a tax rate of 8.8% in an average year.
The Biden administration’s push to raise taxes on household incomes of $100 million and more — first proposed in March 2013 — will likely be stopped by the opposition of Republicans who control the House of Representatives. Other attempts to raise taxes in the past have been blocked by other Democrats.
The US president plans to make a second SOTU speech in which he calls for the surcharge on corporate stock purchasebacks to be increased to four-times the rate. The Inflation Reduction Act of January included the current stock buyback tax at 1%.
According to the White House, the higher rate should encourage companies to reinvest in their growth and productivity rather than “paying corporate executives or funneling foreign tax-preferred profits into shareholders.”
It stated that oil and gas companies made record profits last year and did not invest in domestic production to maintain gas prices low. Instead, they bought stock and gave all the profit to their CEOs, shareholders.
The surcharge will be a greater deterrent to companies who want to purchase back their shares than the current one.
The White House stated that Biden would reaffirm his efforts to lower inflation and maintain a resilient market for jobs during the speech. This was just days after the surprise January jobs report which saw the economy add 517,000 jobs.
It stated that the president is demonstrating his commitment to reducing federal budget deficits “by ensuring that the wealthy and large corporations pay what they owe.”
Investors are becoming more concerned about the economic risk if the US falls back into default on its debt. This is after the US took “extraordinary measures” to reach its $31.4 trillion borrowing limit in January.