What a Second Biden Term Means for Taxes

The richest Americans should expect multiple tax increases if President Joe Biden is reelected in November and the Democrats end up in control of the Senate and House of Representatives, according to a leading taxation expert.

The claim was made in an interview with Newsweek by Ed Oswald, a tax specialist who co-authored From Ronald to Donald: How the Myth of Reagan Became the Cult of Trump.

On March 12, Biden and former President Donald Trump secured a string of primary victories, setting them up as their respective party's presumptive presidential nominees for November's election. This has focused attention on the policy differences between the two men and what they would seek to do if elected.

Oswald told Newsweek that the difference between what Biden and Trump want to do regarding tax policy is dramatic but noted that November's winner will face significant constraints on what they can do unless they also control Congress.

"If Biden is elected, I would expect to see a range of tax increase proposals primarily aimed at wealthy individuals and corporations," Oswald said.

"As with a Trump presidency, much of Biden's success or lack thereof on the tax policy front will depend on which party controls the House and Senate. Also, we can expect the Biden Administration to support funding for IRS [Internal Revenue Service] modernization, enforcement, and staffing."

Specifically, Oswald said, "Biden has called for an increase in the corporate tax rate from 21 percent to 28 percent and a minimum tax on 'billionaires' of 25 percent."

Increasing corporate tax to 28 percent would effectively reverse a key component of Trump's 2017 flagship Tax Cuts and Jobs Act, which created a single flat corporate tax at 21 percent. The act also reduced most of the seven income tax brackets that is due to expire in December 2025.

A study by the Institute on Taxation and Economic Policy, a progressive-leaning think tank, concluded that the act primarily benefited the wealthy with nearly half of the tax reductions going to individuals earning at least $232,000 per year.

Oswald said Trump would likely try to extend it if he is elected for a second term, whereas Biden would "advocate that the majority of the tax cuts" contained in the legislation be allowed to expire. He also suggested Trump could seek to slash the highest rate of income tax, which currently sits at $609,350+ for singles and $731,200+ for a married couple filing together, if returned to the White House.

The taxation specialist concluded that "some form of tax increase" is very likely under Biden due to "the proposed spending initiatives in Biden's fiscal year 2025 budget" and his "desire to diminish the income and wealth gap in the U.S."

However, Oswald warned that whichever candidate wins in November is likely to be at least partially hamstrung by the national debt, currently about $34 trillion. He noted that according to Congressional Budget Office figures, the cost of interest on the debt alone in 2024 is likely to be nearly $870 billion, meaning it "now approaches the cost of the annual U.S. defense budget."

"The Trump tax cuts added $2 trillion to the debt with unpaid giveaways skewed to the wealthy and large corporations, and now Congressional Republicans are proposing to add another $3 trillion to the debt by extending them," White House Assistant Press Secretary Michael Kikukawa told Newsweek. "President Biden's approach couldn't be more different.

"He is fighting to cut taxes for working families and the middle class—standing by his commitment to never raise taxes on households earning less than $400,000—while responsibly reducing the deficit by making the wealthy and large corporations pay their fair share."

While sharp differences exist between Republicans and Democrats over income tax policy, Oswald argued that this has not always been the case, with both parties supporting substantially higher taxes on high earners until Ronald Raegan came to office.

"For most of the prior century, there were not a significant difference in federal income tax rates regardless of whether a Democrat or a Republican was in the White House," he said. "For example, the highest marginal income tax rate during the Eisenhower Administration was north of 90 percent.

"When Richard Nixon was president, the highest marginal tax rate was 70 percent or higher. From approximately 1932 to 1980, the Internal Revenue Code was highly progressive with the highest marginal income tax rate averaging around 80 percent.

"All of that changed with the election of Ronald Reagan. Under his two-term presidency, the highest marginal income tax rate was reduced from 70 percent to 28 percent."