Biden proposes $5.8tn budget plan with record tax increase

US budget plan includes defence spending, climate funds, law enforcement support and police reform

'We spent less money than the last administration and got better results,' US President Joe Biden said. EPA

US President Joe Biden on Monday submitted a $5.8 trillion budget plan to Congress that calls for record peacetime military spending and further aid for Ukraine, while raising taxes for billionaires and companies and lowering government deficits.

Mr Biden's budget proposal for the 2023 fiscal year lays out his administration's priorities, including campaign promises to make the wealthy and companies pay more tax. It is merely a wish list as lawmakers on Capitol Hill make the final decisions on budget matters.

"The budget I am releasing today sends a clear message to the American people (about) what we value: first, fiscal responsibility, second, safety and security, and thirdly ... the investments needed to build a better America," Mr Biden told reporters at the White House.

The 2023 budget calls for nearly $1.6tn in so-called discretionary spending — areas that aren’t linked with mandatory programmes such as Social Security — with $813 billion for defence-related programmes and $769bn for domestic spending.

That marks a 5.7 per cent increase from the omnibus spending bill for the 2022 fiscal year that was signed by Mr Biden this month. The budget would reduce deficit spending by $1tn over the coming decade, buoyed by the elimination of pandemic assistance programmes.

The Democratic president said he was calling for higher defence spending to strengthen the US military and "forcefully respond to [Russian President Vladimir] Putin’s aggression against Ukraine" with $1 billion in additional US support for Ukraine’s economic, humanitarian, and security needs.

The document offers fresh insight into Mr Biden's thinking as he attempts to halt the largest war in Europe since World War Two and prepares for a November 8 midterm election that could see his party lose control of Congress.

His administration is "making real headway cleaning up the fiscal mess I inherited", Mr Biden said, and would reduce the federal deficit by more than $1.3 trillion this year with $1 trillion in further reductions planned over the next decade.

“For most Americans the last few years were very hard, stretching them to the breaking point. But billionaires and large corporations got richer than ever," he said, adding, "That's not fair."

The president also sidestepped fragile negotiations over the remnants of his Build Back Better agenda, putting only place holder figures in the document in what White House officials acknowledged was an effort to give members of Congress space to negotiate.

The hope in the White House is that Monday’s document can offer momentum to negotiations with senators such as Democratic senators Joe Manchin of West Virginia and Kyrsten Sinema of Arizona, who have raised concern over historic spending levels and inflation.

Mr Biden is calling for more than $2.5tn in tax increases on wealthy and large corporations over a decade, on top of the nearly $1.5tn of increases included in the House’s version of the Build Back Better plan.

The proposal adds a 20 per cent minimum tax on the unrealised capital gains for households worth at least $100 million, a political win for progressives who have been pushing Mr Biden to increase pressure on the mega-wealthy.

If enacted fully, this year’s plan would be the largest tax increase in history, but it includes several major jumps that have already been rejected by some Democrats in Congress.

Mr Biden again called to raise the corporate rate to 28 per cent from 21 per cent, and hoist rates on the highest-earning Americans to 39.6 per cent.

The president is calling for $813bn in total defence spending for the coming year, with the bulk of the funds — $773bn — going to the Pentagon in what the White House describes as “one of the largest investments in our national security in history".

Under the White House’s blueprint, defence spending is projected to grow from $813bn in fiscal 2023, to $843bn in fiscal 2024 and $851bn by 2025.

A host of tax breaks cherished by oil and gas drillers would be repealed — even as the Biden administration prods the industry to produce more domestically to lower prices and help wean allies off of Russian fossil fuel.

He included a $33.2bn proposal for law enforcement, crime prevention and community violence intervention programmes that the White House intends as a high-profile counter to the call from some progressives to “defund the police”.

The president also asks for $367m for the Justice Department’s budget to support police reform, prosecution of hate crimes, and enforcement of voting rights — an increase of more than $100m from 2021.

There’s also money for police body cameras and prison reform, as well as $50bn for cheaper housing construction. The administration is also seeking more than $200m more for antitrust enforcement, which White House aides say will help fight inflation and improve competition.

Agencies contributed to this report.

Updated: March 28, 2022, 10:09 PM
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