CBO Releases Estimate of Biden’s 2023 Budget, Hiking Taxes Part of Proposals to Increase Federal Revenue

President Joe Biden delivers a primetime speech at Independence National Historical Park in Philadelphia, Pa., on Sept. 1, 2022. Alex Wong/Getty Images

The Congressional Budget Office (CBO) released its estimate of the Biden administration’s annual set of budgetary proposals to Congress, and examined how the proposals, if enacted, would affect budgetary outcomes in relation to CBO’s baseline projections.

Based on CBO projections, President Joe Biden’s proposals will have the effect of budget deficits totaling $13.1 trillion over the next decade. Deficits would average 4.2 percent of gross domestic product (GDP) over that period. Revenues are expected to be higher—mainly from the proposal of raising the corporate income tax rate, from 21 to 28 percent—and would be $1.7 trillion (or 3 percent) more than revenues are in the CBO’s baseline projections for the 2023–32 period.

“The cumulative deficit for the 2023–2032 period would be $2.6 trillion smaller than it is in CBO’s baseline projections because revenues would be higher and spending lower,” said the report.

Federal debt held by the public would decline, from 97.9 percent of GDP this year to 95.3 percent in 2024, and then go up steadily every year through 2032, when the debt would reach 102.5 percent of GDP, said the CBO. Since 1972, the debt has averaged 45.6 percent of GDP, while revenues have averaged 17.3 percent of GDP.

According to Biden’s proposals, revenues are projected to equal 19.6 percent of GDP in 2022, fall between 18.3 and 19.0 percent of GDP from 2023 to 2027, and would amount to 18.7 percent of GDP every year from 2028 to 2032.

President’s Proposals to Increase Federal Revenue

The Biden administration is expected to hike corporate income tax rate from 21 to 28 percent, including those of foreign affiliates of U.S. companies. This proposal would raise revenues over the 2023–32 period by a total of $873 billion, according to estimates from the Joint Committee on Taxation (JCT).

Ensuring foreign multinational corporations with operations in the United States were subject to a minimum rate of taxation would net $319 billion in federal revenues over the 10-year period.

Biden is planning to tax long-term capital gains and qualified dividends of people with taxable income of more than $1 million at rates applicable to ordinary income—”the highest rate would generally be 37 percent (or 40.8 percent when the net investment income tax is included).” The current tax rate is 20 percent. When an asset appreciates in value, donors or deceased owners “would realize a capital gain at the time of the transfer.” All this is expected to increase revenues over the 2023–32 period by $195 billion.

Biden proposes to raise the top marginal income tax rate to 39.6 percent. “The proposal would also lower the income thresholds that would be subject to the top rate,” said the report. This is expected to hike revenues by $170 billion.

Republicans Respond

The president’s budget submission is expected to increase the levels of spending, debt, and taxes to the highest levels in U.S. history, with spending and taxes going up by 62 percent and 80 percent, respectively, said House Republicans in a press release.

“The $2 trillion American Rescue Plan sparked the highest inflation in 40 years,” said House Budget Committee Republican Leader Jason Smith (R-Mo.). “During an inflation crisis, Biden’s budget spends $71 trillion over the next 10 years. After hiring an army of 87,000 new IRS agents to impose more audits and force working families to pay higher taxes, Biden’s budget levies $58 trillion in taxes,” adding that “Biden’s budget would produce the highest sustained annual deficits in U.S. history.”

The Republicans also listed out some of the policies of the administration that has resulted in an economic, social, and energy crisis such as canceling the Keystone XL pipeline and failure to renew or issue new domestic oil and natural gas leases, “catch-and-release” policies that has seen 3.2 million illegal border crossings since Biden became president, $150 million cut out of Immigration and Customs Enforcement (ICE) funding, and zero prohibitions against funding of viral research in China.

According to the budget watchdog Committee for a Responsible Federal Budget (CRFB), the policies that the Biden administration has implemented through executive actions and legislative efforts will add about $4.8 trillion to deficits between 2021 and 2023.