During his upcoming State of the Union, President Biden will propose raising taxes substantially on corporations and the wealthy.
He will seek to increase the corporate tax rate to 28% and minimum to 21%, up from 15%.
Biden also wants to levy a 25% minimum tax on individuals worth over $100 million.
This contrasts with former President Trump, who reportedly wants to make permanent the tax cuts he enacted, which reduced corporate taxes to 21% from 35%.
“The President is proposing to levy a 25 percent minimum tax on the wealthiest 0.01 percent, those with wealth of more than $100 million,” the White House stated.
An expert warned that the US’s $34 trillion debt could cause an economic meltdown by 2025 if interest rates spike due to other countries no longer buying so much US debt.
The expert said the large tax cuts or spending plans proposed by either party risk interest rate increases that could trigger a crisis.
“As we discuss promises about ‘what we’re going to do with tax and programs,’ it’s going to be important to put it in the context of ‘Can we afford that?’” Wharton Business School finance professor Joao Gomes said. “It’s a really obvious moment in history for us to say: ‘Okay, what are our choices; what can we feasibly do; who has the better plan?’ I suspect neither party is interested in that, and it might all be pushed under the rug.”
“Toward the latter part of the decade we will have to deal with this,” he added. “It could derail the next administration, frankly. If they come up with plans for large tax cuts or another big fiscal stimulus, the markets could rebel. Interest rates could just spike right there, and we would have a crisis in 2025. It could very well happen. I’m very confident by the end of the decade one way or another, we will be there.”
“The most important thing about debt for people to keep in mind is you need somebody to buy it. We used to be able to count on China, Japanese investors, the Fed to [buy the debt]. All those players are slowly going away and are actually now selling. … If at some moment these folks that have so far been happy to buy government debt from major economies decide, ‘You know what, I’m not too sure if this is a good investment anymore. I’m going to ask for a higher interest rate to be persuaded to hold this,’ then we could have a real accident on our hands,” Gomes said.
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