A White House budget plan is politically charged and aspirational; it is a wish list of programs that frequently receive little support from Capitol Hill when the actual spending legislation are drafted. After years of working as an economics and budget writer, the Fact Checker is aware that while the numbers in a White House budget may add up, the underlying assumptions are frequently questionable. Ronald Reagan had a favorite accounting trick known as the “magic asterisk.” These were savings that were supposed to be discovered later, but they were never. President Biden has included his own magic asterisk in his 2025 budget proposal, which was made public last week. He says he would keep one of his most well-known 2020 campaign pledges, which is to keep taxes on incomes under $400,000 flat, but he doesn’t say how he will finance it.
The concept of the ‘Magic Asterisk’
As he ran for president, Joe Biden made it clear that no one with less than $400,000 in income would face tax increases. Clearly. He said, “Bingo,” on May 22, 2020. Biden pledged to protect himself from Republican accusations that he would raise taxes on the middle class, even though his proposal to fund massive new social programs would need billions of dollars in tax hikes on the extremely rich and companies.
| Aspect | Detail |
| Pledge | Taxes on everyone earning less than $400,000 would not be increased. Clearly. |
| Funding Sources | Tax rises worth trillions of dollars on companies and the very rich. |
| Tax increases Proposed | Put in place an extra 5% tax rate on income beyond $10 million. Restrict high-income taxpayers’ itemized deductions; Restore estate tax exemptions to their 2009 levels. |
| Estimated Revenue Needed | Over a ten-year period, at least $1.7 trillion in additional revenue |
| Budget Plan | Raising the capital gains tax rate to 39.6% for those earning above $400,000. |
| Deficit Reduction | $3 trillion in debt reduction without outlining how the $400,000 pledge would be funded. |
| Inflation Adjustment | With changes for inflation, the top 2% of taxpayers are impacted by the $400,000 level. |
| Fiscal Responsibility | A pledge to resolve 2025 expirations and to reorient tax law to encourage labor rather than wealth |
Analyzing the feasibility of the tax pledge
Biden has no issue with higher taxes on the affluent as he opposed the tax reduction in 2017. However, allowing the entire tax reduction to expire would go against his promise to anyone earning less than $400,000.
A pledge to address the issue in a “fiscally responsible manner” by funding “extending tax cuts for people earning less than $400,000 with additional reforms to ensure that wealthy people and big corporations pay their fair share” is one of the guiding principles the president listed to direct this debate. However, Biden’s plan for doing so is not made clear in the budget.
The 2025 plan already includes a plethora of tax increases on the rich and corporations, including a billionaire wealth tax, to pay for proposed social program initiatives. It suggests raising the investment tax on those earning more than $400,000 and enacting a top tax rate of 39.6% on those who earn over $400,000.
Transparency and accountability in tax policy
Although the White House has not provided a figure, we estimate that at least $1.7 trillion in additional revenue over a ten-year period will be required to ensure that there are no tax increases on individuals earning less than $400,000. This estimate is based on estimates from the Congressional Budget Office for 2023 and the Tax Policy Center for 2022 regarding the portion of the tax cut that goes to the wealthy. Despite failing to find a method to pay for the president’s $400,000 commitment, White House officials maintain that they can legitimately claim the president’s budget includes $3 trillion in deficit reduction since it states he is committed to ensuring that any adjustment is revenue neutral.
Conclusion
In conclusion, Technically, as more individuals are now in the $400,000 tax bracket due to salary rises, inflation has somewhat undermined Biden’s pledge. In 2020, a $333,000 salary would be equivalent to $400,000 in current currency. The White House maintains the $400,000 threshold, claiming that it solely impacts the wealthiest 2 percent of taxpayers. (An additional estimate puts the figure as high as 5%). The new top rate would, however, be subject to annual inflation adjustments under the budget.
