Biden Seeks Extension of Trump Tax Cuts for Most Households

The budget provides the White House’s clearest statement yet on one of the largest fiscal choices facing the country in the coming years, and one that will be a major part of next year’s presidential campaign. But Mr. Biden’s budget doesn’t outline a detailed plan for extending the tax cuts and doesn’t include those costs. 

The White House position essentially means that while the president is claiming that his budget reduces deficits by nearly $3 trillion over the next decade, he is also proposing more than $1.5 trillion in additional tax cuts that aren’t included in that number. 

Covering the revenue shortfall created by extending the tax cuts could require the president to shrink his deficit-reduction target or propose additional tax increases on top of the trillions of dollars of tax increases he is already seeking and struggling to advance through Congress. 

The administration is likely to use its stance on the 2017 tax law to draw a contrast with Republicans, who say those tax cuts were a success and should be extended without offsetting tax increases. 

The quandary facing lawmakers in the coming years stems from the way the 2017 tax cuts were written by then-President

Donald Trump

and the Republican-controlled Congress. To make the law fit within budget rules that let them pass the tax cuts without any Democrat votes, they chose to schedule the individual tax cuts to expire after 2025. 

“This was one of the most egregious and fiscally reckless budget decisions in modern history,” the White House budget says. 

That decision was in part a bet that a future Congress would extend the bulk of the expiring tax cuts without paying for them, just like Congress did in 2013 as the Bush tax cuts were expiring.  

If Congress does nothing, the tax cuts will automatically expire, including the rate cuts on top earners that Democrats have complained about. But much of the cost of the tax cuts comes from changes that affect the middle-income households, which Democrats want to protect from tax increases. 

Those taxpayers are benefiting from lower rates, a larger standard deduction and a bigger child tax credit. And there is little political appetite in either party for allowing those changes to expire. 

The budget statement doesn’t mention one of the trickiest political pieces of the tax cuts for Democrats: the $10,000 cap on state and local tax deductions. That raises revenue for the government, but disproportionately affects residents of Democratic-leaning states such as California and New York.

In his budget, Mr. Biden outlines a series of tax increases and other revenue-raising provisions. Some of those would reverse the 2017 tax cuts by raising the top individual income-tax rate and corporate tax rate. 

But in the budget, that money is dedicated for new spending programs or for deficit reduction, not for extending the expiring tax cuts. 

The president “supports additional reforms to ensure that wealthy people and big corporations pay their fair share, so that America pays for the continuation of tax cuts for people earning less than $400,000 in a fiscally responsible manner and address the problematic sunsets created by President Trump and congressional Republicans,” the budget says. 

There are some Biden tax-increase proposals from the 2020 presidential campaign that the administration hasn’t tried to advance or put in its budget. Those include higher estate taxes and caps on itemized deductions, provisions that face even more resistance from Democrats than the plans in the budget. 

Mr. Biden’s approach stands in contrast to how Democrats handled the expiration of the Bush tax cuts in 2010 and 2012. 

Then, lawmakers largely assumed that the tax cuts would get extended and never attempted to pay for keeping lower rates for middle-income households.

Write to Richard Rubin at [email protected]

The budget provides the White House’s clearest statement yet on one of the largest fiscal choices facing the country in the coming years, and one that will be a major part of next year’s presidential campaign. But Mr. Biden’s budget doesn’t outline a detailed plan for extending the tax cuts and doesn’t include those costs. 

The White House position essentially means that while the president is claiming that his budget reduces deficits by nearly $3 trillion over the next decade, he is also proposing more than $1.5 trillion in additional tax cuts that aren’t included in that number. 

Covering the revenue shortfall created by extending the tax cuts could require the president to shrink his deficit-reduction target or propose additional tax increases on top of the trillions of dollars of tax increases he is already seeking and struggling to advance through Congress. 

The administration is likely to use its stance on the 2017 tax law to draw a contrast with Republicans, who say those tax cuts were a success and should be extended without offsetting tax increases. 

The quandary facing lawmakers in the coming years stems from the way the 2017 tax cuts were written by then-President

Donald Trump

and the Republican-controlled Congress. To make the law fit within budget rules that let them pass the tax cuts without any Democrat votes, they chose to schedule the individual tax cuts to expire after 2025. 

“This was one of the most egregious and fiscally reckless budget decisions in modern history,” the White House budget says. 

That decision was in part a bet that a future Congress would extend the bulk of the expiring tax cuts without paying for them, just like Congress did in 2013 as the Bush tax cuts were expiring.  

If Congress does nothing, the tax cuts will automatically expire, including the rate cuts on top earners that Democrats have complained about. But much of the cost of the tax cuts comes from changes that affect the middle-income households, which Democrats want to protect from tax increases. 

Those taxpayers are benefiting from lower rates, a larger standard deduction and a bigger child tax credit. And there is little political appetite in either party for allowing those changes to expire. 

The budget statement doesn’t mention one of the trickiest political pieces of the tax cuts for Democrats: the $10,000 cap on state and local tax deductions. That raises revenue for the government, but disproportionately affects residents of Democratic-leaning states such as California and New York.

In his budget, Mr. Biden outlines a series of tax increases and other revenue-raising provisions. Some of those would reverse the 2017 tax cuts by raising the top individual income-tax rate and corporate tax rate. 

But in the budget, that money is dedicated for new spending programs or for deficit reduction, not for extending the expiring tax cuts. 

The president “supports additional reforms to ensure that wealthy people and big corporations pay their fair share, so that America pays for the continuation of tax cuts for people earning less than $400,000 in a fiscally responsible manner and address the problematic sunsets created by President Trump and congressional Republicans,” the budget says. 

There are some Biden tax-increase proposals from the 2020 presidential campaign that the administration hasn’t tried to advance or put in its budget. Those include higher estate taxes and caps on itemized deductions, provisions that face even more resistance from Democrats than the plans in the budget. 

Mr. Biden’s approach stands in contrast to how Democrats handled the expiration of the Bush tax cuts in 2010 and 2012. 

Then, lawmakers largely assumed that the tax cuts would get extended and never attempted to pay for keeping lower rates for middle-income households.

Write to Richard Rubin at [email protected]