A top White House economist defended tax proposals geared toward the wealthiest Americans outlined by President Joe Biden during his second State of the Union address.
Jared Bernstein, a member of the White House Council of Economic Advisers, said Biden’s tax proposal will goal big corporations and the wealthiest Americans while protecting taxpayers who earn $400,000 a yr or less from tax hikes.
“The times of the highest 1% paying lower than teachers and nurses … those have gotten to be behind us as we inject fairness into the tax code to attain fiscal rectitude,” Bernstein said in an interview Wednesday on CNBC’s “Squawk Box.”
Biden signed into law a 15% minimum tax on corporations earning greater than $1 billion in profits under the Inflation Reduction Act. A 1% excise tax on the worth of stock buybacks, which might enable large corporations to avoid paying taxable dividends, was also passed under the act.
During his State of the Union address Tuesday night, Biden urged Congress to pass his so-called billionaire’s tax, which proposes to impose a minimum 20% tax on households with a net value of greater than $100 million — a 12 percentage point increase from an average of 8% they currently pay.
Bernstein also defended the president’s tax rate on capital gains, which he initially proposed in 2021. If enacted, the 48.6% rate with a 3.8% net investment income on long-term capital gains and qualified dividends would rate amongst the very best within the developed world.
The tax rate would apply to those earning over $1 million. The highest 1% of earners paid 42.3% of all federal taxes in 2020, in keeping with the Tax Foundation, which puts to query whether the wealthiest Americans pay lower taxes than teachers and firefighters.
“You called it a wealth tax on unrealized gains,” Bernstein said of the capital gains tax proposal. “In reality, what it truly is, or no less than the best way we see, it’s a prepayment or withholding tax on future capital gains.”
“If you happen to’re a wealthy individual or a company and also you’re paying a tax rate lower than 15% in your corporate income, or lower than 20% in your income, including … capital gains, well, then we’ll change that and that is injecting fairness into this act,” he said. “It’s disallowing wealthy tax cheats to evade the code, and it helps to attain the sort of fiscal responsibility that this president wants to construct on in the remaining of his first term.”
Bernstein also addressed the continued debt ceiling debate and said that while Biden is willing to barter on fiscal matters, he won’t negotiate with regards to raising the federal debt limit, especially if cuts to Medicare and Social Security are on the table.
“We wish to see what the Republican plan is,” he said. “And I feel if Republicans are true to their word and taking Social Security and Medicare off the table … and military spending off the table, which means they might need to cut 85% of what is left. That is not realistic.”
