- See what’s in President Biden’s $1.8 trillion “human infrastructure” proposal…
- If passed, child care, paid family leave, and more could get some hefty funding…
- How Biden proposes paying for the plan — and why the markets could take a hit…
President Joe Biden is preparing for his first joint address to Congress tonight and the focus for Wall Street is on taxes.
The president will outline the American Families Plan during that address, including how plans to fund it.
Rumors swirled last Thursday about plans for a large capital gains tax increase. That prompted a quick sell-off on Wall Street as investors and traders feared their profits would take a hit.
The White House released a fact sheet on the plan ahead of tonight’s address — let’s break it down.
What Does the Plan Include?
The Biden administration says the American Families Plan “includes $1.8 trillion in investments and tax credits for American families and children over ten years.”
This is the second part of Biden’s infrastructure proposal after the $2.2 trillion American Jobs Plan was unveiled at the end of March.
The big-ticket items are as follows:
- $225 billion for child care services
- $225 billion for a national paid family and medical leave program
- $200 billion for free universal preschool for all three- and four-year-olds
- $109 billion for two years of free community college for all students
But that’s only $759 billion … Here’s what else the proposal would fund:
- About $85 billion toward Pell Grants
- $62 billion for a grant program to increase college retention and completion rates
- $39 billion for a program that funds two years of subsidized tuition for students from families earning less than $125,000 who attend a four-year HBCU, tribal college or university, or minority-serving institution
- $45 billion to meet child nutritional needs
- $200 billion to extend the healthcare tax credits passed under the latest COVID stimulus plan
The plan would also make several tax cuts passed under the latest stimulus bill — the American Rescue Plan — permanent.
That includes the fully refundable $3,000 child tax credit, the expansion of the child and dependent care tax credit, and the earned income tax credit for childless workers.
How Will the Plan Be Funded?
The White House says the cost of the proposal will be fully offset in 15 years by raising taxes on the richest Americans, undoing key parts of the Tax Cuts and Jobs Act of 2017.
Biden is expected to call on Congress to raise the top marginal tax rate to 39.6% from the current 37%. That would impact joint filers who make $612,351 or more annually and single filers who make $306,176 or more.
And so far, no changes in the rumor about the capital gains tax increase. The White House Press Secretary Jen Psaki remains tight-lipped on any details about that proposal, saying she doesn’t want to get ahead of the president’s address.
At this point, Biden is still expected to call for a near doubling of the capital gains tax rate for households making over $1 million annually, raising it to 39.6% from the current 20%.
Both tax hikes come in addition to the corporate tax hike that’s part of Biden’s traditional infrastructure proposal.
There are still questions about when the capital gains tax hike will be implemented. Congress may choose to make the tax retroactive to the beginning of this year. But they’re more likely to make the effective date January 1, 2022, alongside a corporate tax increase.
If so, you might expect a big dip on Wall Street in the fourth quarter as investors take profits at the lower 20% rate.
President Biden will address the joint session of Congress around 9 p.m. Eastern with Republican Senator Tim Scott delivering the rebuttal afterward.
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