The U.S. presidency is set for a tidal shift come January 2021, when former Vice President Joe Biden succeeds President Donald Trump after a Saturday projection showed he was set to win the 2020 race.
Biden will inherit a much weaker economy than Trump did back in 2017, which some experts say may challenge his more progressive policy proposals that include tax hikes on wealthy earners, student loan forgiveness and a public health insurance option similar to Medicare. The fate of those plans also depends on the balance of power within the Senate, which will likely be decided following a January run-off election in Georgia. Trump is also challenging the results of the election and has yet to officially concede.
“Among Joe Biden’s top challenges will be to foster a continued economic recovery including among the substantial number of Americans who were fearful, right or wrong, of his election,” says Mark Hamrick, Bankrate’s senior economic analyst and Washington bureau chief.
1. Biden’s coronavirus and economic stimulus plans
Biden’s top challenge will be getting the U.S. economy back on track. A Bankrate quarterly poll of economists suggests that won’t happen for at least two and a half more years, with job growth momentum slowing and the CARES Act-backed stimulus provisions passed back in March fading away.
The Biden-Harris campaign underscored four “Day One” priorities in a transition website created Monday: handling the coronavirus pandemic, the economic recovery, racial equity and climate change.
The first two priorities go hand in hand, having a sizable impact on your wallet — and they’re also likely to be the biggest priorities for the Biden administration, analysts say.
“Controlling the pandemic, getting a vaccine out, restoring people’s confidence to be back in the marketplace and the labor market will be a huge plus for everyone, but disproportionately more so for folks we would call the average Americans,” says Steve Skancke, chief economic adviser at Keel Point.
Biden’s pandemic-fighting plans include:
- Increasing the availability and reliability of coronavirus testing;
- Boosting personal protective equipment (PPE) production;
- Setting up a reserve of funds for state and local governments to address pandemic-related budget shortfalls;
- Creating a Public Health Jobs Corps to employ at least 100,000 Americans for contact tracing jobs;
- Directing the CDC to issue more specific reopening guidelines;
- Investing $25 billion in vaccine manufacturing and distribution; and
- Allocating funding from Congress to help schools and small businesses cover the cost of plexiglass and other PPE.
Infrastructure plan for stimulus
Biden’s plans to stimulate the economy appear to be two-fold, with the first priority being an infrastructure plan intended to spur job creation, similar to the Great Depression-New Deal era of public job programs.
Those ideas, which form together into a $2 trillion infrastructure plan previously discussed on the campaign trail, include:
- Creating 1 million new jobs in the auto industry by expanding factory floors;
- 250,000 jobs for plugging abandoned oil and natural gas wells;
- Another million jobs for updating homes, transit and buildings to be environmentally friendly and sustainable;
- A separate $700 billion manufacturing program to create what he estimates could be 5 million jobs by investing in American-made products; and
- Tax credits for firms if they expand U.S. operations and hire more workers.
Other plans include creating jobs to update and build smart roads, water systems, municipal transit networks, schools, airports, rails, ferries and increasing broadband access, according to Biden’s campaign website.
The U.S. economy currently has a jobs deficit of about 10.1 million positions from the coronavirus pandemic’s economic effects.
Economic relief similar to the CARES Act
But some experts say stimulating the economy comes after helping U.S. households get through the crisis.
“A near-term priority is getting us into a situation where there is enough cash to go around and keep people functioning basically through this crisis,” says James Knightley, chief international economist at ING. “Then we get in the second phase and that is sustaining the recovery and really building on what we’ve got.”
The CARES Act from March looks to be a blueprint for Biden’s main relief plans, with the Biden-Harris campaign reportedly wanting to:
- Send another round of direct stimulus payments;
- Forgive $10,000 of federal student loans per borrower;
- Boost monthly Social Security checks; and
- Provide emergency paid sick leave to all workers in all industries and sectors.
Top of mind for many Americans is whether — and how much — they’ll receive in another round of payments. The Biden-Harris campaign hasn’t provided information on eligibility for those second checks, though Democrats have been vocal about including incarcerated individuals and those who didn’t have a Social Security number but still paid U.S. taxes. Other Democratic lawmakers have proposed making adult dependents who are over age 17 eligible for the additional $500 check that goes to families who still claim a child on their tax returns.
2. Biden’s tax policy plans
Biden’s plans to fight the coronavirus and the economic recovery come with a big price tag — meaning, odds are, they’ll have to be financed by raising taxes. The U.S. federal deficit in 2020 alone has already soared to its widest level ever, thanks to Congress’ massive response with the CARES Act.
A key Biden campaign message, however, has been that he’s only planning to raise those taxes on the country’s wealthiest earners and corporations. That looks like:
- Everyday Americans: Restoring the top-line tax rate of 37 percent to 39.6 percent, which was reduced after Trump’s Tax Cuts and Jobs Act (TCJA) of 2017. As of 2020 (taxes due in 2021), single filers earning $518,401 or higher and married filers earning more than $622,051 are currently taxed at the top-line rate of 37 percent.
- Corporations: Raising the corporate tax rate from 21 percent to 28 percent, introducing a 15 percent minimum “book” profit tax on companies that earn more than $100 million a year in revenue; making employers pay payroll taxes on wages at or above $400,000 a year (Currently, those taxes are capped on earnings of $137,700).
- Investments: Taxing capital gains as income, regardless of whether they’re a short-term or long-term investment, on earners who make more than $1 million annually; eliminating a “step-up in basis” that allows descendants to pass those investments to heirs tax free.
A more stimulative aspect of Biden’s tax plans, the president-elect supports amping up a child care tax credit that families with dependents up to 13 years in age can use to subsidize half of their child care costs, as long as it doesn’t exceed $8,000 for one child or $16,000 for two children. Families making less than $125,000 annually would be eligible for the full 50 percent credit. After that threshold, a partial credit would be available to individuals whose incomes come in under $400,000.
Biden has also floated the idea of providing a $15,000 tax credit to first-time homebuyers to help them with their first property purchase, similar to the Great Recession-era program meant to get the housing market back on track.