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Biden releases $3.2 trillion tax plan, highlighting divisions with Sanders and Warren

Former vice president rejects calls for new ‘wealth’ tax on millionaires and billionaires

Democratic presidential candidate Joe Biden speaks in Mason City, Iowa, on Dec. 3. (Charlie Neibergall/AP)

Former vice president Joe Biden released a plan Wednesday to raise $3.2 trillion in taxes over 10 years to pay for his domestic spending proposals, including on health care and climate, as he seeks to cast himself as the fiscal moderate in the Democratic presidential primary amid pressure from his liberal rivals.

Biden’s plan calls for raising the tax rate paid by corporations from 21 percent to 28 percent, still below the 35 percent level in place before the 2017 GOP tax cut law. He also plans to raise $800 billion from new taxes on capital gains primarily paid by investors, as well as $400 billion from imposing a new 15 percent corporate minimum tax that aims to ensure big firms pay at least some taxes, among other measures.

Biden “is committed to being transparent with the American people about the smart and effective ways he’d pay for the bold changes he’s proposing,” said Stef Feldman, Biden’s policy director.

The federal government is projected to bring in $3.8 trillion in revenue in 2021, so Biden’s plan would aim to boost tax revenue by less than 10 percent in the first year.

The plan, first reported by Bloomberg News, highlights the fissures in the Democratic primary by stopping short of many more-aggressive tax measures pitched by Sens. Elizabeth Warren (Mass.) and Bernie Sanders (I-Vt.). For example, Warren and Sanders have proposed more than $20 trillion in new taxes over 10 years, at least six times as much as Biden’s.

Biden, for instance, rejects the liberals’ calls for levying new wealth taxes on multimillionaires and billionaires that would vastly reduce their fortunes and clout.

Biden also opts not to adopt more-aggressive measures that had been under consideration by some advisers to his campaign, including a new tax on Wall Street transactions.

Where 2020 Democrats stand on economic inequality

Similarly, Biden proposes increasing the top income tax rate from 37 percent to 39.6 percent, where it was before the 2017 GOP tax law. Rep. Alexandria Ocasio-Cortez (D-N.Y.), who has endorsed Sanders, made waves this year by calling for a 70 percent tax rate on top earners.

“[Biden] continues to carve out for himself an agenda that’s in the single-digit trillions rather than the double-digit trillions,” said Jared Bernstein, an economist who served as an adviser to Biden when he was vice president, who added the plan was still highly progressive. “That’s designed to appeal to the moderate part of the electorate, and so far that’s worked.”

Biden’s plan is also likely to meet resistance from conservatives for dramatically raising taxes on firms through a number of measures — many of which were also pushed by President Barack Obama.

Even though Biden’s proposal is starkly different than some of his rivals in the Democratic primary, it would further set him apart from the approach President Trump has promised to pursue. Trump has called for following up the $1.5 trillion tax cut in 2017 with a new round of tax cuts, which advisers want to market as a boost for the middle class.

Biden’s plan would seek to prevent corporations from taking advantage of the tax code in a way that allows them to avoid paying many taxes. It would set a global minimum tax for companies based in the United States to recapture revenue if they book their profits in low-tax jurisdictions such as Bermuda or Ireland.

It would also cap how much firms can claim in deductions, end loopholes for real estate investors in the tax code and impose sanctions on countries that allow illegal corporate tax avoidance. Biden had backed many of these ideas before this week but not in as much detail as the newly released plan.

While more acceptable to Republicans than the ideas of Sanders and Warren, Biden’s plan would still make the United States the most heavily taxed country for firms in the OECD, when state and local taxes are taken into account, said Brian Riedl, a tax expert at the Manhattan Institute, a libertarian-leaning think tank.

Biden’s math is made easier by pitching less dramatic federal programs than his opponents. Sanders and Warren have called for more than $20 trillion of new spending on a Medicare-for-all health-care system that would guarantee free coverage to all Americans.

Biden’s health-care plan, which the campaign says will cost less than $1 trillion, would leave 10 million people without insurance and do far less to rein in high deductibles and premiums faced by millions of Americans.

Sanders has pushed a plan to tackle climate change that would cost $16 trillion, calling for $2 trillion alone as part of a “Green New Deal” on funding to weatherize and retrofit homes and businesses. Biden’s climate change and infrastructure proposal would cost about $1.7 trillion in total.

Biden’s tax plan also says it will raise $750 billion for his higher-education plan, which includes debt-free community college. Warren and Sanders have proposed trillions in new education spending, as well as the elimination or vast reduction of student debt.

“Biden continues to plan the least ambitious federal program of the top-tier candidates,” said Robert C. Hockett, a professor at Cornell University who has provided policy input for Warren and Sanders. “It’s kind of a drop in the bucket given the long-term problems in the economy. It’s small potatoes for a federal plan.”