WASHINGTON — President Joe Biden on Thursday will propose policies aimed at trimming federal budget deficits by nearly $3 trillion over the next 10 years as his administration embraces the politics of debt reduction amid a fight with Republicans over raising the nation's borrowing limit, a senior administration official said Wednesday.
Biden's plans, which will be detailed as part of his budget blueprint, are expected to rely heavily on a familiar batch of tax increases on corporations and high earners along with savings from some spending reductions. These include efforts to save money on federal health care programs by expanding legislation he signed last year that allows Medicare to negotiate the price of certain prescription drugs.
The president faces pressure from Republicans, who won control of the House last fall, to alter the nation's fiscal path. House Republicans have refused to raise the nation's debt limit, which caps how much money the federal government can borrow, unless Biden agrees to steep cuts in federal spending.
To help increase federal revenues and reduce the nation's reliance on borrowed money, Biden will announce a new 25% tax on American households worth more than $100 million that would apply to both their earned income and the unrealized gains in the value of their liquid assets, like stocks, an administration official said. He proposed a similar tax last year but at a lower rate, 20%.
Biden will also call for quadrupling a tax on stock buybacks that was approved as part of a sweeping tax, health care and climate bill he signed last year. He will renew his long-standing call to roll back former President Donald Trump's tax cuts for high earners and to partially reverse his cuts for corporations, by raising the corporate income tax rate to 28% from 21%. And he will once again call for raising a tax rate on multinational corporations' income earned overseas.
White House officials said this week that the budget would include an increase and expansion of an investment tax on high earners, which would be directed to the Medicare trust fund. That tax proposal, plus the proposed savings from additional Medicare negotiations on prescription drugs, would reduce deficits by about $900 billion on net, according to Treasury Department estimates shared by the White House.
The president is also expected to continue proposing some tax increases to offset the cost of portions of his agenda that have not yet passed Congress. That agenda includes efforts to expand access to child care and reduce its cost, provide federally guaranteed paid leave for workers, establish universal prekindergarten and enable students to attend community college for free.
Biden's plans to trim the deficit are unlikely to mollify Republicans. He has refused to negotiate over the debt limit and has said he will not cut benefits for Social Security or Medicare, two popular safety net programs. But he has said repeatedly that he is open to reducing deficits by raising taxes on corporations and the rich.
The total of nearly $3 trillion was first reported by The Associated Press. It is an increase from the deficit reduction that Biden previewed in his State of the Union address, saying that "the plan I'm going to show you is going to cut the deficit by another $2 trillion" without cutting "a single bit of Medicare or Social Security."
The federal government has run deficits every year since 2000, spending more money than it receives in tax revenue. The deficit ballooned under Trump after the onset of the pandemic recession, which spurred Congress to approve trillions of dollars in relief for individuals, businesses, and state and local governments. Trump also signed tax cuts into law that are projected to add $2 trillion to deficits over the course of a decade.
The nation's borrowing levels remained elevated in 2021 under Biden, who signed a $1.9 trillion economic aid package soon after taking office, but declined last year. They are set to rebound in the years to come and rise above $2 trillion by 2032, according to the nonpartisan Congressional Budget Office.
Republicans have ruled out raising taxes to reduce deficits. They have joined Biden in saying cuts to Medicare and Social Security are also off the table. That appears to leave little room for agreement in ways to bring down future debt.
But Biden and Speaker Kevin McCarthy, R-Calif., have expressed optimism that they can find some sort of agreement on fiscal policy.
"I believe we have common ground," McCarthy told reporters Wednesday. "It won't be in taxes. But I think we could find ways to grow this economy."
Catie Edmondson contributed reporting.