President Biden’s new budget proposal is an exercise in political spin. The president has reaffirmed his support for his $2.4 trillion Build Back Better extravaganza, but simply left its massive cost out of his proposed tax and spending totals. Even more baffling, he’s scoring the cost of his other tax proposals against a tax code that assumed Build Back Better was already law, which inflated the claimed savings from his new plan.
Between Build Back Better and the new budget, Biden is proposing a staggering $3.5 trillion in new taxes over the decade—the vast majority of which would finance huge new spending.
The timing of these proposals may suggest that Washington is suffering from plummeting tax revenues. In fact, federal tax revenues last year soared to 18.1 percent of the economy—the highest share in 20 years. Furthermore, the Congressional Budget Office projects that tax revenues over the next 30 years will remain well above the typical share of the economy.
Long-term deficits are instead driven by federal spending projected to leap from 21 to 32 percent of the economy over that period.
Biden is targeting corporate taxes, even though these tax revenues have already jumped by 61 percent over the 2019 pre-pandemic level. If we combine Biden’s proposals in his budget and Build Back Better (and incorporate the income taxes paid by pass-through businesses), then business taxes at the federal and state level would reach 4 percent of GDP by 2025. That would exceed the…
