March 9, 2023 | 9:02 PM
President Joe Biden speaks during a budget discussion for fiscal year 2024 at the Finishing Trade Institute in Philadelphia, Pennsylvania, on Thursday, March 9, 2023.
Saquan Stimpson – CNP/MEGA
President Biden’s budget request is meant to drive headlines that show he claims to cut the deficit by $3 trillion over the next decade.
In reality, his budget proposes the biggest tax hike in modern history, pouring much of the new savings into new spending and pushing Social Security down the road to bankruptcy.
Let’s start with taxes.
Inflation-adjusted federal revenues are already $1 trillion above pre-pandemic levels and boast the second highest share of the economy since World War II.
Still, the president will raise taxes by another $5 trillion over a decade, the biggest tax increase since the 1960s.
Total revenues will approach 20% of the economy and income tax revenues will average 10% of the economy over a decade.
Both would be the highest sustained tax burden in American history.
American corporations will bear much of the tax burden.
Total corporate taxes have increased by 56%, making them the highest share of the economy since the 1970s (and likely surpassing 1970s levels when small business taxes are taken into account).
Much of these revenues will come from raising the corporate tax rate from 21% to 28%.
Including state taxes, US businesses face the second-highest tax burden of any member country of the Organization for Economic Co-operation and Development.
In a world of global tax competition, America will once again undermine its own competitiveness.
Sharp tax increases can be defended when accompanied by equivalent spending cuts as part of a balanced plan to eliminate Washington’s multi-trillion dollar deficit.
Instead, $2 trillion of these new taxes will go toward new spending initiatives. On top of his $5 trillion new spending that Biden has already enacted.
Inflation-adjusted spending of $5 trillion before the pandemic will reach almost $7 trillion next year, or $51,000 per household.
Total federal government spending reached 25% of the economy within a decade, a level not seen outside of World War II and the recent pandemic.
So the president’s record tax hikes can’t keep up with runaway spending.
Publicly held national debt would still jump from $25 trillion to $44 trillion, even if a $5 trillion tax hike resulted in the highest sustained tax burden in U.S. history, according to the president’s own figures.
Even with peace and prosperity, the annual budget deficit will exceed $2 trillion.
Just paying interest on government bonds will cost taxpayers $10 trillion over the next decade. That’s more money than any program other than Social Security and Medicare.
When it comes to Social Security and Medicare, Biden has portrayed himself as an advocate for those programs.
But not a single penny of the President’s $5 trillion tax hike will go to avert the planned collapse of Social Security in a little over a decade.
By rejecting any proposal for social security reform, Mr. Biden is essentially supporting the planned 20% cut in automatic benefits in just over a decade.
Biden also claims his budget has funded Medicare for 20 years.
He proposes significant tax increases for high income earners, investors, and small businesses to support Medicare Part A (hospital insurance).
However, many of the alleged Medicare trust fund improvements are simply by transferring existing general funds.
Also, this budget does little to contain the unsustainable costs of Medicare Part B and D (physician and prescription drug benefits) that push Medicare’s 30-year shortfall to $80 trillion.
Taxpayers may be tempted to ignore a new $5 trillion tax primarily aimed at businesses and families with incomes above $400,000.
But high business taxes are ultimately passed on to families through higher prices, lower wages and reduced retirement investments.
And with inflation still running high across the economy, and rising interest rates increasing the risk of a recession later this year, companies and investors now have new, potentially inflationary, large-scale This is not the time to impose taxes.
But this budget poses even more direct risks to the middle class.
The pool of revenue to “tax the rich” is not infinite.
Bridge the remaining $17 trillion deficit that the President proposes over the next decade if he wants to push corporate and high-income taxes to their highest sustained levels, primarily to fund government expansion. So whose tax will be left?
As the wealthy taxpayers finance new spending, they will eventually have to raise taxes to combat the remaining deficit.
Biden has proposed a political document intended to generate sympathetic headlines rather than start serious negotiations with Republicans.
More taxes, more spending, a $17 trillion deficit, a broken Social Security, etc. are not serious and responsible propositions.
Brian Riedl is a Senior Fellow at the Manhattan Institute. Twitter: @Brian_Riedl