Biden plans to raise taxes on the highest incomes to fund new social programs

Joe Biden intervenes this Thursday by videoconference at the global climate summit.JOHANNA GERON / AFP

The president of the United States, Joe Biden, plans to present an extension of the colossal infrastructure plan focused on social programs, such as expanding the coverage of child protection and improving the public education offer, among others, for which he contemplates raising taxes to the highest incomes. Unlike the infrastructure plan presented a few weeks ago, consisting of an investment of two trillion dollars to modernize the country and create millions of jobs, and that the Democratic Administration aspires to finance through a corporate tax increase, this second part of the The plan would be paid for with a tax increase on the wealthiest taxpayers. In total, both initiatives will involve an investment of about four trillion dollars.

To pay for the social plan, the president contemplates, according to the information advanced this Thursday by

The New York Times

, to increase the tax rate on the highest incomes, from 400,000 dollars a year, as well as the tax on capital income.

The wealthiest Americans could see their income tax increase to 39.6% from 37% today, the result of Donald Trump's tax cut in 2017. Capital gains are now taxed differently from income, a often with a lower rate, up to 20%;

According to Biden's proposal, this rate would also rise to 39.6% for those who earn more than a million dollars a year.

More information

• The US Treasury Secretary calls for a minimum corporate tax on a global scale for multinationals

• Biden Introduces Tax Reform to Raise $ 2.5 Trillion

• Biden's first federal budget proposal prioritizes social spending and the fight against climate change

The most progressive faction of the Democrats has long demanded a kind of wealth tax, with concrete initiatives being raised in states like New York to tax millionaires.

The objective is twofold: to wipe out the deficit public coffers and also to raise extra funds to face the recovery from the pandemic.

Another aspect to modify the current tax system would be the inheritance tax, according to the information provided by the New York newspaper, which is now only taxed at the time of inheritance, and which does not contemplate the subsequent revaluation of the assets received.

Biden is scheduled to present the so-called American Family Plan before appearing before Congress next week. The proposal will not address an expansion or improvement of the health system, which would constitute a separate legislative initiative, according to the newspaper. Some of the Obamacare provisions have already been included in the stimulus plan against the pandemic, the first presented by the Democratic Administration and the only one approved to date.

The social program ―or the “human infrastructure” plan, as defined by the White House― foresees maintaining until 2025 the extension of the deduction per child adopted in the rescue plan, with cash payments to parents, even those who income is exempt from taxation, to substantially reduce child poverty, a scourge that the pandemic has painfully highlighted. The ultimate goal is to raise millions of Americans by halving the poverty that affects one in six children.

"The combined infrastructure proposal has been split into two (physical and social infrastructure), as Biden believes it will be politically easier to push the proposals separately," says Jack Janasiewicz, strategist and portfolio manager at fund manager Natixis IM. . The main objections to what Republicans see as a waste will come not just from the opposition in Congress, but also from their own ranks. "The moderates [Democrats] propose a lower corporate tax increase of 25%," adds Janasiewicz. It is the average that would facilitate the legislative approval of the first plan, around July 4, according to the calculations of the White House.