‘Doesn’t add a single penny’: Fact-checking Biden’s deficit claims
According to Biden, his latest proposal — the $1.8 trillion American Families Plan — “doesn’t add a single penny to our deficit,” he said in Portsmouth, Virginia on Monday.
Biden hopes to achieve this and offset the costs of both the American Families Plan and the roughly $2 trillion American Jobs Plan with a series of changes to the tax plan. Biden’s proposed tax provisions include a capital gains tax increase for households making over $1 million, increasing the corporate tax rate from 21% to 28%, raising the top marginal income tax rate to 39.6% for households with $400,000 or more in income and requiring estates to pay taxes on unrealized gains of more than $1 million.
Facts First: According to experts and current studies of the proposals, the plans — if unchanged — will likely increase deficits in the short term but will be deficit-neutral in the long run. However, there are a lot of factors that could affect Biden’s deficit-neutral goal, including how Congress might change the plans and the tax provisions, whether the proposed tax increases remain in place if Democrats lose control in DC and how much the tax changes will actually collect if implemented.
Marc Goldwein, Senior Policy Director for the CRFB told CNN “it’s great” the administration aims to have the plans pay for itself but he would prefer a different timeframe. Historically, the target window for a budget to become deficit neutral is 10 years but with these plans, it’s 15.
“We’re concerned,” Goldwein said. “That’s an awful long time period. And a lot can happen between now and then.”
According to Goldwein, a longer time frame “just reduces the likelihood that they’re going to meet the goal.”
When asked about Biden’s deficit promise, City University of New York associate professor of economics J.W. Mason told CNN that the zero-deficit rhetoric could come back to hurt Biden’s proposals.
“When they put down that marker, ‘we’re gonna pay for this 100%,’ and then they find that it’s hard to get those taxes through,” Mason said, “you end up with a smaller program than the country needs and that’s the danger.”
If Biden’s initial proposed tax increases are approved and remain in place long enough, here’s what experts have to say about the impact the American Jobs Plan and American Families Plan are likely to have on the deficit.
American Jobs Plan
Senior Policy Analyst at the right-leaning Tax Foundation Garrett Watson told CNN the American Jobs Plan would run a deficit in the short-term but that, because the spending is largely short-term and the proposed tax increase on corporations is permanent, the costs could potentially be offset by the tax increases in the White House’s 15-year window.
“(I)t becomes a question of the policy and politics of increasing the deficit over that 10-year window,” Watson noted, “versus looking at it in the longer run.”
American Families Plan
Watson told CNN that funding for the American Families Plan is different than the American Jobs Plan because it relies heavily on projections of what the IRS might be able to collect in additional taxes if they receive an increased budget of $80 billion.
“(I)f it ends up falling short, for any reason really, you do end up in a situation where you got to find alternative funding for the permanent spending,” Watson said. “I think that’s the big wildcard there from a longer-term deficit perspective.”
Biden’s plan also calls for a temporary expansion of the Child Tax Credit. Some Democrats would like to make these increases permanent, the cost of which isn’t included in Biden’s plan.
Another potential issue in covering the cost of the American Families Plan is on the changes to the capital gains tax. If individuals think Biden’s tax could be reversed in the future, they might choose to wait on realizing those gains.
