Biden pushing tax hikes in election year despite experts warning it would reduce economic output

President Biden is pushing for trillions in tax hikes during an election year, despite experts warning it would reduce economic output and have other dire effects. It may be popular with the anti-corporate elements of potential voters, but tax experts say it's a mistake.

"The tax increases would substantially increase marginal tax rates on investment, saving, and work, reducing economic output by 2.2 percent in the long run, wages by 1.6 percent, and employment by 788,000 full-time equivalent jobs," according to a recent Tax Foundation analysis. "On a gross basis, we estimate Biden’s FY 2025 budget would increase taxes by about $4.4 trillion over that period [of 2024 to 2034]. After taking various credits into account, the increase would be about $3.4 trillion," read the analysis.

The tax changes Biden is seeking include "additional taxes on high earners, higher taxes on U.S. businesses— including increasing taxes that Biden enacted with the Inflation Reduction Act (IRA) — and more tax credits for a variety of taxpayers and activities," the Tax Foundation found.

The non-partisan organization included that the "combination" of tax policies Biden is pursuing "would move the tax code further away from simplicity, transparency, and neutrality, while making the U.S. economy less competitive."

Biden has proposed raising tax on individuals and families with incomes above $400,000, raising the corporate tax rate to 28% from 21% and enacting a 25% minimum tax on certain high-income taxpayers.

Biden was previously able to successful push a 15% corporate minimum tax through Congress. In his fiscal year 2025 budget, he would increase that minimum tax rate from 15% to 21%.

The president also wants to "deny business deductions for employee compensation above $1 million," according to the tax policy group PWC.

"The increase in the corporate tax rate and the additional taxes on top earners would result in U.S. top marginal tax rates on income that are among the highest in the developed world," the Tax Foundation said.

The organization also found that "raising the corporate income tax rate to 28 percent is the largest driver of the negative effects, reducing long-run GDP by 0.9 percent, the capital stock by 1.7 percent, wages by 0.8 percent, and full-time equivalent jobs by 192,000."

The Republicans on the House Ways and Means Committee, the House's committee that oversees tax legislation, warned that Biden's tax increases could jump to $7 trillion over 10 years.

"As much as 75 percent of the burden of corporate tax increases falls on American workers and consumers in the form of lower wages and higher prices according to recent economic studies," the Ways and Means Committee reported in an analysis of Biden's budget.

The late former President George H. W. Bush had campaigned on "read my lips: no new taxes" when he defeated Michael Dukakis. He would up signing a tax package that raised taxes and lost to former President Bill Clinton in 1992. 

Bush had reached an agreement with congressional Democrats in 1990 that included tax increases. According to the Tax Policy Center, the Omnibus Budget Reconciliation Act of 1990 "raised many taxes, including the top individual income tax rate, the individual alternative minimum tax rate, and payroll taxes (though it also expanded the Earned Income Tax Credit)."

Former President Donald Trump, Biden's likely 2024 opponent, is already campaigning against Biden's fiscal 2025 budget proposal.

"He’s going to give you the greatest, biggest, ugliest tax hike in the history of our country," Trump said during a rally in Richmond, Va. on March 4. "In the old days, when we were like a sane country, a tax hike meant you wouldn’t win an election. Today they could say, 'We’re going to give you the biggest tax hike' and people vote for them. I don’t know, the country’s very screwed up, but they’re going to give you the biggest tax hike in history."

Trump predicted that Congress would extend the Trump-era tax reform package with across-the-board tax cuts if he wins the general election. 

"You’re all getting tax cuts because we are going to extend the Trump tax cuts and then some," he said.