President Joe Biden used Thursday night’s State of the Union address to promote taxing billionaires and protecting Social Security while accusing Republicans of wanting to give tax breaks to the wealthy and cutting Social Security.
About halfway through the 67-minute address, Biden said he’d continue to “stand up for seniors” by protecting Social Security.
“If anyone here tries to cut Social Security or Medicare or raise the retirement age, I will stop you.”
President Joe Biden during Thursday’s State of the Union address
“Many of my friends on the other side of the aisle want to put Social Security on the chopping block. If anyone here tries to cut Social Security or Medicare or raise the retirement age, I will stop you,” Biden said. “The working people who built this country pay more into Social Security than millionaires and billionaires do. It’s not fair.”
Biden didn’t get into specifics during the speech about how he plans to fix Social Security’s funding issues—just adding (after challenging Republicans about wanting to give more tax breaks to the wealthy), “I’ll protect and strengthen Social Security and make the wealthy pay their fair share.”
But how he would tackle the issue is apparent from some recent Democratic proposals, including Rep. John Larson’s (D-CT) Social Security 2100 Act and Sen. Sheldon Whitehouse’s (D-RI) Medicare and Social Security Fair Share Act, would require taxpayers who earn more than $400,000 to contribute to the program. Under current law, workers stop paying into Social Security when they reach an income cap ($168,600 in 2024). This applies to all workers, meaning the highest earners stop contributing to the program when they’ve reached that ceiling.
The $400,000 threshold is important to the Biden Administration because of his repeated pledges never to raise taxes on anyone making less than $400,000.
Billionaire tax
Also during Thursday’s address, Biden proposed tax on the ultra-rich that would set a minimum 25% tax for anyone worth at least $100 million—the wealthiest 0.01%, generating an estimated $500 billion in revenue over the next 10 years.
“No billionaire should pay a lower federal tax rate than a teacher, a sanitation worker or a nurse,” Biden said Thursday. “I propose a minimum tax on billionaires of 25%—just 25%.”
While Biden’s claim during the speech said that billionaires now pay an 8.2% tax rate (from a Sept. 2021 White House calculation of tax rates), other estimates peg the rate higher. According to an Aug. 2023 study from University of California, Berkeley economist Danny Yagan, the wealthiest 400 families in the U.S. paid an average inflation-adjusted income tax rate of 12% over a roughly 30-year period from 1992 to 2020. And PolitiFact said the effective tax rate for the richest Americans is “more than 20% on the income the government counts under the current tax code.”
It’s no mystery that the ultra-wealthy generally pay a low tax rate with the help of sophisticated accountants using a variety of available tax shelters. President Biden is looking to redefine income to include unrealized capital gains and then impose minimum taxes on them.
“Billionaires make their money in ways that are often taxed at lower rates than ordinary wage income, or sometimes not taxed at all, thanks to giant loopholes and tax preferences that disproportionately benefit the wealthiest taxpayers,” reads a March 7 White House Fact Sheet on the issue.
While Biden is expected to push his billionaire tax plan as the 2024 presidential election plays out, it is extremely unlikely the proposal would gain any traction on Capitol Hill prior to the election.
SEE ALSO:
• State of the Union: Will Biden Propose Social Security Expansion?
• Biden State of the Union Moment: Bipartisan Agreement on No Cuts to Social Security and Medicare?
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.