The Daily - The Accidental Tax Cutter in Chief

Episode Date: April 3, 2024

In his campaign for re-election, President Biden has said that raising taxes on the wealthy and on big corporations is at the heart of his agenda. But under his watch, overall net taxes have decreased.Jim Tankersley, who covers economic policy for The Times, explains.Guest: Jim Tankersley, who covers economic policy at the White House for The New York Times.Background reading: An analysis prepared for The New York Times estimates that the tax changes President Biden has ushered into law will amount to a net cut of about $600 billion over four years.“Does anybody here think the tax code’s fair?” For Mr. Biden, tax policy has been at the center of his efforts to make the economy more equitable.For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday.

From The New York Times, I'm Michael Barbaro. This is The Daily. Today, in his campaign for re-election, President Biden says that raising taxes is at the heart of his agenda. But as it turns out, so far, he's done the opposite as president. My colleague, Jim Tankersley, explains. It's Wednesday, April 3rd. Jim, welcome back. We haven't seen you since State of the Union. Always a pleasure. So, so great to be here. And yeah, I finally recovered from staying up all night with you guys.

Yeah, you don't even know all night. You stopped and we kept going. That's true. I got a robust three hours that night. You're right. So Jim, in your capacity as really the chief economic thinker covering this president. You recently came across something very surprising. Yeah, it started with a pretty basic question for me. I like to do this crazy thing, Michael, where I like to take candidates' promises and see if they've come true. Insane.

It's a little bit wild, but it's what I do for fun. And in this case, I wanted to look at a very central promise of President Biden's campaign in 2020, which he has repeated while in office. I promise you, I guarantee you, we can build back and build back better with economy rewards, work, not wealth. The promise was he was going to raise taxes. Well, I tell you what I'm going to do, and I make no apologies for it. I'm going to ask the wealthiest Americans and the biggest corporations of the Fortune 500 companies, 91, making a collective billions of dollars, didn't pay a single solitary penny

in federal tax. Not taxes on the middle class, not taxes on low-income workers, but he was going to raise taxes on corporations and the rich. Well, I'm going to make sure they pay their fair share. He was going to make them pay their fair share. And he leaned into it. Guess what? You're going to start paying your fair share. I'm going to ask them to finally begin to pay the fair share. It's not a punishment. Pay your fair share. He said it over and over. Fair share translation. It's back to the failed policies of the 1970s.

Republicans loved this. They repeated it, too. They told voters that the president was going to raise taxes. Joe Biden bragging about raising taxes on corporations. That means less money for those very employers to hire people back. They talked about, you know, all the ways in which corporate tax increases could rebound on workers. Joe Biden will shut down your economy, raise taxes. What's a $4 trillion tax increase?

He's the only politician I've ever seen who said, we will raise your taxes. It was a very big part of the economic debate for the campaign. Right. And I wanted to know, is that true? Has that actually played out in the policy agenda the president has had? So I asked some economists at the Tax Policy Center in Washington to run an analysis and just say, let's look at all of the ways Biden has changed the tax code in all of those laws he's signed and ask, has he raised taxes as president? And it turns out the answer is he has not raised taxes. On net, he has cut more taxes than he's

raised. How much more has he cut taxes than raised them? So by the math that economists use when they look at budgets, the traditional way of scoring tax changes, he has cut taxes by $600 billion on net. A lot of money, a lot of tax cuts. It's a lot of tax cuts. The president has been a net tax cutter. So Jim, why and how did Biden end up cutting taxes,

especially if his stated intent was to raise taxes? Well, there's two sides of this equation and sort of two complementary explanations for what's happened here. The first side is the tax increases that Biden ran on. He's only done a couple of them. He has trillions of dollars of ideas for how to raise taxes on rich people and corporations. The Treasury Department publishes an entire book full of them every year called the Green Book. But in the actual legislation he signed, there's only

been a couple, really. There was a tax on stock buybacks that companies do, and then a new minimum tax for certain multinational corporations that have very low tax rates. Those add up to real money, but they are not in the grand scheme of Biden's tax increases, a really large amount of the agenda he's proposed. So explanation number one, he just hasn't been that successful in passing tax increases. And there's a lot of reasons for that. The biggest one is just the simplest one is that he's just had a really hard time persuading members of Congress, including Democrats, to back some of his favorite tax increases. You know, he wants to raise the corporate income tax rate, which President Trump cut in his 2017 tax bill. Biden wants to raise it to 28% from 21%. Congress has not had any appetite to go along with that. He wanted to get rid of

what's called the carried interest loophole, like a longtime white whale of Democratic policymaking. But he could not get even 50 Democrats to go along with that. Senator Kyrsten Sinema of Arizona was opposed to it, and so it didn't get included. And he did some pieces of legislation on a bipartisan basis. And in those cases, Republicans were just not going to pay for anything by raising taxes. And so he had to take those off the table there. So it's all added up to just not very much activity in Congress to raise taxes on what Biden wants to do. Got it. So that's the side of a ledger where Biden simply fails to increase taxes because he can't get Congress to increase taxes. Right. But there's another side, which is also that

Biden has signed into law a decent number of tax cuts. And that starts from the very beginning. Just a couple months into his presidency, if you'll recall, we're still in the depths of the COVID-19 pandemic. The economy is wobbling after it had started to rebound. Biden proposes what is essentially a stimulus bill. Right. And he includes some tax cuts in there, a tax cut for families, a child tax credit. And it also includes, you remember those

direct checks that people got as part of that bill? Yes. $1,400. I remember them. Yes. Those were technically tax cuts. So the stimulus bill starts with that. The next year, he passes this bill that is trying to accelerate manufacturing of things like semiconductors in the United States. That's the CHIPS Act. And that includes some corporate tax cuts for companies that invest in the kind of manufacturing that Biden wants. This is industrial policy via carrots for corporations. And Biden is handing them out as part of this bill. So tax cuts there.

And then finally, the Inflation Reduction Act, which includes the largest climate effort in American history, is a bunch of corporate tax cuts at its core. Tax cuts for manufacturing of solar panels, tax cuts for people to buy electric vehicles, tax cuts for all sorts of things tied to the transition from fossil fuels to lower emission sources of energy. And those tax cuts add up. They add up for corporations. They add up for individuals. And in the end, that full suite of tax cuts that he's passed across all of this legislation

outweighs the modest tax increases that were also included in the Inflation Reduction Act to reduce its cost. Got it. So a very big reason why Biden ends up cutting taxes beyond the fact that he's not able to raise them through Congress is that that's what it took, according to those in his administration, to get American industry and American consumers to change their behavior in line with policy goals, such as getting more domestic computer chip manufacturing and getting more people to buy electric vehicles. They decided the way to do that was to give people tax breaks, which means he cut their taxes. Right. People and companies. The president

certainly has talked throughout the campaign about wanting to give middle class families a break. But he has also, in the process of crafting policy, really come to rely on tax cuts for people and for corporations as a way of achieving these policy goals. And in many cases, again, this is what he had to do to pass these bills through even Democrats in Congress. You know, Senator Joe Manchin of West Virginia didn't want to just send money to companies that were making solar panels. He wanted there to be tax incentives for it. And so that is part of the reason why these were created as tax incentives. And so all this adds up to more of a tax cutting record than you might have imagined when Biden was on the campaign trail. I'm curious who really

ended up benefiting from these tax cuts. You said they went to people and to corporations, but on the whole, did they end up reaching lower-income Americans, middle-income Americans, or the rich? Well, we don't have a full distributional analysis, which is what you're asking for, of the entirety of Biden's tax changes. But we can say this, particularly the ones that were in that early stimulus bill, the recovery plan. Those were very much targeted toward lower income and middle income Americans. There were income limits on who could get things like the child tax credit. Obviously, the direct payments went to people who were middle class or less. So the analysis of that would suggest that these were tax cuts for lower income people, for middle class people. And on the

flip side, what I think we are likely to see with the electric vehicle credit through the Inflation Reduction Act is that while there are some income limits on who can qualify for that credit, that the people who end up claiming that credit tend to be the higher earners among the people who qualify. Right. Who buys a Tesla after all? Somebody with a fair amount of money. Right. Exactly. And of course, the corporate tax cuts go to companies, flow through to their shareholders. There's a huge debate in the academic literature among politicians about how much of that benefit actually ends up going to their workers versus stays with shareholders. But we can broadly say that Joe Biden has done a lot for certain corporations who are trying to advance his manufacturing goals in particular to reduce their tax bills. And that is certainly not in line

with the rhetoric you hear him talking about most of the time about making corporations pay their fair share. And the White House acknowledges this. I asked them about it. And they basically said, you know, we think there's a difference between just cutting the corporate tax rate in a way that helps anybody no matter what they're doing and what we're trying to do, which is basically reward corporations for accelerating the energy transition. But where does this ultimately leave Biden's campaign promise to make the tax code fairer and to make sure that the well-off in particular and corporations are paying their what he called fair share. I think by Biden's own measurements,

by his own ambitions, he would have to agree that he is nowhere close to what he believes would be a fair share for corporations because Because Biden is still running on this. As he enters his re-election campaign, as it really heats up, a rematch with Donald Trump, the president is really leaning into this message of, we need to do more. We need to raise more taxes on corporate America. It is time for these companies

and for high earners to pay their fair share. Right. I didn't get it done in the first term, but if you elect me, I'll get it done in a second. Give me another shot, and this time, I promise we'll be different. We'll be right back. So, Jim, let's talk about Biden's tax-raising plans for a theoretical second term and why anyone should have any faith that he could get it done if there's a second term, given the experience so far of his first term. Yeah, well, man, there's a lot of plans to talk about. I don't think we can get through all of them, but we can certainly hit the highlights here. So we can start with the couple of things that Biden has been able to do to raise taxes on corporations. He sort of like wants to take those and then plus them up. How so?

He's put this new minimum tax on corporations. It's a 15% minimum tax on certain multinationals. He now wants to raise that to 21%. He wants to take that corporate stock buyback tax, which is 1% right now, and he'd like to quadruple it to 4%. And then he goes after, you know, some things large and small. He wants to do new taxes that hit the use of corporate and private jets. He wants to do new taxes on companies that pay large amounts of compensation to their executives. And then we get to some really big taxes on high

earning individuals. So the president has said over and over again, he won't raise taxes on anyone making less than $400,000 a year. But he's got a bunch of taxes for the people above that. So he wants to raise the top marginal income tax rate. He wants to take it from 37%, which is the level set by President Trump's 2017 tax law, and bring it back to 39.6%, which is what it was before. He also wants to impose what he calls a billionaire's tax. Okay? It's a 25% tax on the total value of all of the assets of anyone worth more than $100 million. Okay, wait, I have several questions about this. Please.

First being a fact check, if it's a billionaire's tax, it's interesting that it's going after people who have just $100 million. Yeah, I think most billionaires would be offended at the inclusion of $100 million heirs in that. Yes, totally agree. That is factually inaccurate, the name. Right. But beyond that, this sounds very much like a wealth tax, which we don't really have

in our system. Yeah, it's a sort of wealth tax. The Biden people don't call it a wealth tax, but it is a tax on something other than income that you report every year to the IRS as having been earned. It goes beyond just, oh, I got interest from my stock holdings, or I made money from my job. It's, oh, the value of my art collection increased last year, and now Biden's going to tax me on that increase, even if I didn't sell the art. That's a real change. And that reflects the president's view that people with enough money to buy enormous art collections that appreciate enormously in value should be paying more in taxes. Right. And of course, a tax like this is extremely,

perhaps maddeningly hard to actually pull off. It's hard to get someone to describe their art collections value so that you can apply a 25% tax to it. So this might end up being more of a political statement than a practical tax. Yeah, there's also questions about whether it's constitutional. So there's all sorts of drama around this proposal, but it is certainly, if nothing else, a statement of the president's intent to make people worth a lot of money pay a lot more in taxes. Okay, so that's a lot of proposed tax increases, almost all of them focused on those who are rich and corporations.

Overall, Jim, what stands out to you about this Biden Term 2 tax increase plan? I think we can very fairly say that it's the largest tax increasing plan by a sitting president or a presidential nominee for a party in American history. Wow. He wants to get a lot of money from corporations and people who earn or are worth a lot of money. But the rub, of course, is it's hard to see the congressional math that lets Biden accomplish these tax increases, some of which, like you said, he couldn't get done the first time.

Why would we think he would get them done the second time, even if he wins this fall? Yeah, it would be really difficult. Biden would have to win in November. Democrats would have to take the House of Representatives back from Republicans, which is certainly possible. It's very closely divided right now.

And they'd need to hold at least 50 seats in the Senate. And then those 50 Democrats in the Senate would have to be willing to go along with far more in tax increases than Democrats were last time around. So if there is a second term, it feels like we should assume it will be very difficult, perhaps even quite unlikely, he's going to get to push through a lot of these taxes, which makes me wonder, Jim, why is Biden running on a tax program that he knows has so little chance of becoming reality? And when it's pretty clear that he's gotten a lot of stuff done without raising taxes, it turns out it's not been all that essential to getting infrastructure or

climate bills done. So why is he making this so central? Several reasons. One of them is it's very important to him rhetorically to talk about fiscal responsibility. Big parts of the Biden agenda, the CHIPS bill, the infrastructure bill, some other legislation, were not actually paid for. The spending and tax cuts were not offset by tax increases. So they're going to add to the debt. Right. So they're going to add to the debt. Same is true of the stimulus bill. But moving forward, the president has said that he's going to pay for his agenda and he's actually going to have some extra tax dollars coming in left over to help pay down future budget deficits.

And on paper, it's the way to pay for Biden's other big expansive plans that he hasn't been able to do what wants to. Universal child care, federal paid leave, investing in elder care, just a whole bunch of things that he still wants to do. More housing initiatives. The president needs money to make a case that he's being fiscally responsible, and this is the money that would do that. Got it. So that's one reason. Another reason is the calendar. Biden and his team are looking ahead to the end of 2025. And they know that if he wins another term, he will be in office at a rare moment in Washington

when basically tax policy has to be on the congressional agenda. Why? Well, Republicans, when they passed their tax cuts in 2017, set a bunch of them to expire at the end of 2025 in order to lower the cost of the bill. These are the Trump tax cuts in 2017, set a bunch of them to expire at the end of 2025 in order to lower the cost of the bill. These are the Trump tax cuts. The Trump tax cuts. And that includes all the tax cuts for individuals. So now that those are coming due, there's going to be a fight in Washington over whether to extend them or make them permanent or change them in some way or just let them expire. And Democrats know there's going to be a huge fight that will reach almost certainly the floor of the House and the Senate.

And so Biden wants to be ready. He wants to be ready with a suite of policy proposals the Democrats can basically pull off the shelf and try to use to put Republicans in a box. Basically say, we would like to keep taxes low or cut them further for low-income workers, middle-class workers. But we want to pay for that by raising taxes on the rich.

You Republicans also want to do nice things for low and middle-class workers, but you want to cut taxes for corporations and the rich. And we think that's a political loser for you. So Biden is ready with what they think will be a political winner for Democrats in this almost certain floor tax fight at the end of 2025. Got it. And that sort of brings us to the last reason why Biden is doing this, and maybe the most important, which is, why Biden is doing this, and maybe the most important, which is it's really good politics. Just explain that. Why is talking about tax increases, net tax increases, such good politics? If you talk to Democratic pollsters, if you talk to people inside the White House,

outside the White House, political strategists, anywhere in Biden's orbit, they all agree that the public loves the idea of forcing rich people and corporations to pay their, quote, fair share. It's just become a winning and central political argument in Democratic campaigns, the idea that corporations avoid taxes, that rich people avoid taxes, and that, you know, Joe Biden is trying to position himself as a champion of the idea that they need to pay more. Those corporations and those rich people need to pay more, and he's going to make it happen. You're describing this as something that is kind of a new political reality. Is that right? Yeah, it sort of evolved over the last decade or so, I think. You know, for a long time in Washington, the conventional wisdom was you just couldn't talk about tax

increases of any kind. They were poison. There was a whole anti-tax movement that did a really good job of messaging that. And Democratic candidates got very scared of talking about raising taxes even on the very, very rich. That started to turn over time, but it's really changed, I think. We saw in the 2020 election that the Democratic primary had just enormous amounts of taxes on corporations and the rich, funding all sorts of policy proposals, Medicare for all, and universal child care, and trillions and trillions of dollars. And Democratic candidates like Liz Warren and Bernie Sanders sort of competing to see who could tax corporations and the rich the most.

Biden is sort of a product of that primary. He was one of the most moderate people in that group, but his proposals are really outside of the historical norm for Democratic candidates up until then. And that reflects the fact that pollsters have been doing all this research, finding that the American people, including independents and increasingly numbers of Republicans, just don't think corporations pay their fair share

and are open to the idea they should pay more. This is really interesting. And it makes me think that what you're really saying is that there might have been a time when a Democratic nominee like Joe Biden might have reveled in his image as an overall tax cutter, but that is not this moment and that is not this candidate. He wants to be a tax increaser. He thinks that is where the politics are. I think that's exactly right when you think

about tax increaser as tax increaser on the rich and on corporations. There's sort of two ways to be a successful populist politician, right? One of them is to be kind of like Trump and run around saying you're going to do enormous tax cuts for everybody, which is sort of a Republican version of populism. Trump, my biggest tax cut in history. I'm going to do another huge, enormous tax cut. It's going to be so big you won't believe it. There might have been a time when Democrats tried to follow that playbook, but Biden's not doing that. He's leaning into the other side of populism. He's telling workers, hey, I'm on your side with these big companies. They're trying to screw you and I'm not going to stand for it. And so I'm going

to raise their taxes. I'm going to make them pay more so that there's more money for you, whether that's more tax cuts or more programs or whatever. And that is sort of the democratic version of populism right now. And that's the one that Joe Biden is running on. And that's why he's so happy to talk about raising corporate taxes, because it's a way to tell workers, hey, I'm on your side. Right. Even if that's not what he's done or ever may be able to do. Yeah. Part of the problem with populism is that you make a lot of promises you can't keep. And this certainly in his first term has been an area where the president has talked a much bigger game than he's been able to execute. The second term might be different, but that doesn't really matter for the campaign.

What matters is the rhetoric. Well, Jim, thank you very much. We appreciate it. Thank you. Always a pleasure. We'll be right back. Here's what else you need to know today. On Tuesday, Israel confirmed that it had carried out the airstrike that killed seven aid workers delivering food to civilians in Gaza. The attack, which occurred on Monday, struck a convoy run by the World Central Kitchen, a non-profit group.

At the time of the attack, the aid workers were traveling in clearly marked cars that designated them as non-combatants. Israel's Prime Minister Benjamin Netanyahu described the attack as unintentional and said that his government deeply regretted the deaths. In its own statement, World Central Kitchen called the strike unforgivable and said that as a result, it would suspend its aid work in Gaza, where millions of people are in dire need of both food and medicine. Today's episode was produced by Stella Tan and Mary Wilson, with help from Michael Simon Johnson. It was edited by Lisa Chow, contains original music by Dan Powell and Marion Lozano, and was engineered by Chris Wood.

Our theme music is by Jim Brunberg and Ben Landsberg of Wonderland. That's it for The Daily. I'm Michael Barbaro. See you tomorrow.