Biden to Propose a $1.8 Trillion “Family Plan” in a Prime Time Address

Q&A What’s In the Plan

• Child Tax Credits: Extend the child tax credit that Democrats included in the American Rescue Plan that passed in March. That plan raised the $2,000 per-child credit to $3,000, set the credit at $3,600 for parents of children under age 6 and made parents of 17-year-olds eligible. The credit is fully refundable, so low-income households would get the full benefit, no matter how little they earn. For a household with a 4-year-old and 7-year-old that doesn’t earn enough to pay income taxes, the plan would boost their maximum child tax credit to $6,600 from $2,800. 
• Child Care: American Families Plan would guarantee that low- and middle-income families pay no more than 7% of their income on child care for children under 5 years old. According to the administration, this would save the average family $14,800 a year on child-care expenses. The amount families pay would be based on a sliding scale, from low-income families whose costs would be fully covered to families earning 1.5 times their state median income, who will pay no more than 7% of their income. The mechanism for paying for this is unclear—the Biden plan just says that families will have their costs covered according to that formula.
• Free Schooling: Four more years of free schooling for all Americans, two on the youngest end in the form of universal prekindergarten for three- and four-year-olds, and two after high school in the form of tuition-free community college. The preschool program would apply to families of all income levels and would cost $200 billion over 10 years, though according to the administration it would “prioritize high-need areas.” The plan promises teacher training, wages of at least $15 an hour for all employees, and compensation similar to that of kindergarten teachers for educators with comparable qualifications.
• Higher Education: $109 billion to provide tuition-free community college degrees (typically associate degrees) available to all Americans, including so-called undocumented “Dreamers” who came to the U.S. as children. The plan estimates that if all states and territories participate, up to 5.5 million students could enroll and pay nothing.
• Pell Grants: The maximum Pell Grant for the 2021-22 school year is currently set at $6,495, and Mr. Biden would increase that by $1,400. The administration calls this a down-payment on the ultimate goal of doubling the maximum grant amount.
• Paid Leave: The Biden plan’s paid leave program would take a full decade to fully implement, and would cost $225 billion over that period. It starts slowly, ensuring workers get three days of bereavement leave a year. By the 10th year of the program, it will have scaled up to guarantee 12 weeks of paid parental, family and personal illness leave. It will pay workers up to $4,000 a month, with a minimum of two-thirds of average weekly wages replaced. For low-wage workers that could be closer to 80% of their wages.
• Income Tax Hike: The plan would hike the top rate to 39.6% from 37%. Currently, that is taxable income above $523,600 for individuals and $628,300 for married couples. It isn’t clear when these tax changes would take effect.
• Dividend Tax Hike: The top rate would jump from 23.8% to 43.4%, including a 3.8% tax on investment income. The rate applies to those making more than $1 million. Currently, there is a 3.8% tax on investment income and an equivalent set of taxes on wages and self-employment income. The administration, citing holes in the law, says it would apply those taxes consistently to income over $400,000. Mr. Biden used a common technique involving S corporations to avoid the 3.8% tax on much of his speech and book income after he left the vice presidency.
• Death Taxes: Currently, people who own appreciated assets owe capital-gains taxes when they sell. If they die, that entire gain goes untouched by the income tax. Their heirs then pay capital-gains taxes only if and when they sell and only on the gain since the original owner’s death. By contrast, the Biden plan would treat a bequest other than a charitable donation as a sale for tax purposes. So an individual who bought a business for $2 million and dies when it is worth $9 million would have a $7 million capital gain on his final tax return. Biden wants to ensure there is no significant tax benefit from holding assets until death.
• Carried Interest and Real Estate: The plan would tax the carried-interest income of private-equity managers and others as ordinary income instead of capital gains, though the capital-gains changes would already address much of that gap. In addition, he would limit what are known as like-kind exchanges, in which real-estate investors defer capital-gains taxes when they swap properties. That benefit would be capped at $500,000, and that would change how many commercial real-estate transactions are done.
• IRS: The administration would add $80 billion to the IRS budget over the next decade to beef up enforcement and increase audits of high-income people. It would also require banks to provide the government with more information about the inflows and outflows from bank accounts, which the IRS could use to determine who it audits.

The above details excerpted from the WSJ. Other sites reporting the same details. 

How To Watch

Biden is expected to address Congress at 9:00 Eastern this evening. All the major channels will have it. 

Rebuttal

Senator Tim Scott, S.C. the only Black Republican Senator will follow Biden with a rebuttal.

Where’s This Headed?

That’s the key question. 

Whatever the Congressional Budget Office does not rule as a budget item is headed to the ash bin. It would not survive a Republican filibuster. 

Since the rules keep changing I am unsure but most of the above appears to be budget-related.

I highly doubt any Republicans would vote for this plan. That means Democrats cannot afford to lose a single Senator in which case Kamala Harris would break the tie.

The House is even more complicated. Assuming the Republicans all hold,  Democrats can only afford to lose two votes. They will get another Representative this October which would give them a third vote to lose.

Mish