May 1, 2024
Will President Joe Biden’s tax policies inadvertently squeeze more money out of the pockets of low- and middle-income Americans?
That’s the question buzzing on the minds of millions of Americans after the president wrote on X, formerly Twitter, that he would let the Trump Tax Cuts expire.
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“Donald Trump was very proud of his $2 trillion tax cut that overwhelmingly benefited the wealthy and biggest corporations and exploded the federal debt,” the head of the Oval Office wrote on April 23. “That tax cut is going to expire. If I’m re-elected, it’s going to stay expired.”
If his intention with that post was to trigger debate, the president certainly succeeded. Countless politicians, business leaders and tax commentators have since warned against letting the Tax Cuts and Jobs Act (TCJA) of 2017 expire on December 31, 2025, claiming such a move will financially harm hard-working Americans.
Among those speaking out against Biden's plan is “Shark Tank” investor Kevin O’Leary, who said on Fox Business that raising taxes “at this time” could cause a recession and job losses.
“When you add taxes to the economy, you’re taking away money from entrepreneurs and small businesses in America,” said O’Leary. “You’re taking away from them and putting it back to the government. It’s not as fruitful there and it hurts growth.”
He also criticized Biden’s spending bills, notably the Inflation Reduction Act and CHIPS and Science Act, saying they caused money to “come flushing out of the skies in helicopters” and that hurts Americans “at the kitchen table.”
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Is he right?
A tussle over taxes
Among the most impactful tax reforms in U.S. history, the TCJA reduced individual income tax rates for households across every income level, hiked the standard deduction and it doubled the Child Tax Credit for children under 17 from $1,000 per child to $2,000 per child, among other things.
Many of these tax breaks helped millions of Americans — Trump supporters and opponents alike — hold onto more of their hard-earned cash. But now they’re worried they’re going to have to resume those payments to Uncle Sam.
Despite saying he will let the TCJA “stay expired” if he is re-elected in November, that doesn’t actually mean President Biden plans to hang working families out to dry.
He has insisted he will not raise taxes for those making less than $400,000. During a recent hearing, Treasury Secretary Janet Yellen said the president would negotiate with Congress in order to preserve certain tax cuts while letting others lapse.
“The president has been very clear that no family earning less than $400,000 will face a tax hike,” said Yellen. “He has not proposed such a thing since he took office, and he’s not proposing to allow that to happen when parts of TCJA expire.”
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However, Republicans have argued that Biden’s proposed tax hikes on corporations would still hurt average Americans.
In O’Leary’s opinion, when countries raise taxes they “become less competitive.” He added: “You start seeing corporations, particularly in the S&P 500, contort themselves to move offshore and then we lose jobs. So it’s not a great idea at this point. I don’t like tax hikes right now. I think we’ve got to wait that out a little bit.”
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O’Leary’s tax alternative
Instead of planning to let Trump’s tax cuts expire, O’Leary thinks the U.S. government should be focused on “remain[ing] competitive” and “in the middle of the [taxation] pack” in the G20.
He believes that will allow businesses to continue to thrive in America and local entrepreneurs to create jobs that boost the economy.
“Make it so that people say: ‘I could put more money into my business,’ or ‘I can invest in America,’ or ‘I can invest in something else, including my savings or my retirement.’ These are all good things,” he said.
“Raising taxes is great rhetoric when you’re going into an election cycle — but is it pragmatic for the economy post-election? In my opinion, the answer is no.”
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Bethan Moorcraft is a reporter for Moneywise with experience in news editing and business reporting across international markets.
