“Nothing is so permanent as a temporary government program.”

Milton Friedman

President Biden proposes making all temporary emergency spending programs permanent. I’m being cheeky, but only partly. He wants to bring back emergency Covid child tax credits, make pandemic era health insurance subsidies permanent, and extend the temporary home water utility subsidy program. His proposed $6.9 trillion budget for next year also brings back many things he proposed last year which didn’t make it through Congress: a billionaire minimum tax, taxing capital gains as ordinary income, and increasing the top individual tax rate. He also continues to promise:

“No one earning less than $400,000 per year will pay a penny in new taxes.”

White House Fact Sheet for Biden’s FY 2024 Budget Proposal

That’s not exactly true, however. The net investment income tax, for example, applies to people making half that amount, and Biden leaves the door open for that tax rate to be increased. Additionally, Biden proposes an increase of the corporate tax rate from 21% to 28%, but most corporations are actually small businesses with owners that frequently make less than $400,000 per year.

Here are the 18 most interesting things included in Biden’s budget proposal for fiscal year 2024:

1. Bigger & more permanent child tax credits
2. Bigger & more permanent health insurance subsidies
3. Free universal preschool & subsidized child care
4. Expanded & subsidized college
5. Higher taxes to pay for Medicare
6. Higher taxes to pay for Social Security
7. Billionaire minimum tax
8. Raise the corporate tax to 28%
9. Quadruple the stock buyback tax from 1% to 4%
10. Raise the top individual tax rate to 39.6%
11. Tax capital gains in excess of $1 million as ordinary income
12. More affordable housing
13. Subsidized home energy & water utilities
14. Climate spending
15. Expanded free school meals
16. Paid family & sick leave
17. Technology R&D and manufacturing
18. Increased federal law enforcement & community intervention

1. Boost child tax credits by 50+% and make them refundable

Biden proposes to restart the full Child Tax Credit program that was originally enacted as an emergency measure during Covid as part of the American Rescue Plan. The program would boost the existing credit from $2,000 to $3,000 per child for children 6+ years old and to $3,600 for children under 6. Biden also proposes to reform the child tax credit program to make the credits fully refundable.

2. Bigger & more permanent health insurance subsidies

The Inflation Reduction Act enacted temporary subsidies for health insurance premiums that averaged $800 per year for people obtaining insurance under the Affordable Care Act (ACA). Biden proposes making these subsidies permanent as well as providing Medicaid-like coverage to individuals in states that have not adopted Medicaid expansion under the ACA, paired with financial incentives to ensure states maintain their existing expansions.

3. Free universal preschool & subsidized child care

Biden proposes to fund a federal-state partnership program to provide free universal preschool. How much will this cost? It’s unclear.

Biden also proposes state subsidies to provide cheaper child care for over 16 million young kids. How much will that cost? Again, it’s unclear. Grand View Research reported the size of the U.S. child care market in 2022 at just over $60 billion, so probably something around that much.

4. Expanded free community college & increased college subsidies

Biden proposes to increase the discretionary maximum Pell Grant by $500. The max Pell Grant award has already been increased by $900 over the past two years (with bipartisan support) so it’s very likely that this will end up in the final 2024 budget approved by Congress.

Biden also proposes additional mandatory and discretionary funding to expand free community college and provides mandatory funding for two years of subsidized tuition for students from families earning less than $125,000 who are enrolled in a participating four-year Historically Black College or University (HBCU), Tribally-Controlled College or University (TCCU), or Minority-Serving Institution (MSI). I expect this part of the budget to be highly contentious and probably not make it into the final budget as-is.

5. Higher taxes to pay for Medicare

Medicare is the federal health insurance program that currently covers acute and post-acute care for approximately 65 million Americans who are either over 65 or have long-term disabilities. In 2022, Medicare expenditures totaled $905 billion. Just a year earlier in 2021, Medicare benefit payments totaled $689 billion, net of premiums. That’s 20% of all national health care spending that year and 12% of the federal budget.

Medicare Part A benefits are paid out of the Medicare Hospital Insurance (HI) trust fund. Based on current projections from the Medicare Board of Trustees, the HI trust fund is projected to be depleted in 2031.

Biden proposes delaying Medicare insolvency by 25 years by (1) redirecting revenue from the Net Investment Income Tax into Medicare and (2) increasing taxes on wealthy individuals.

6. Higher taxes to pay for Social Security

Biden proposes marginal increases in inflation-adjusted social security funding to be paid for by increased taxes on high-income individuals.

7. Create a Billionaire Minimum Tax

Biden proposes a 25% minimum tax on billionaires. As with his proposal for a billionaire minimum tax in previous years, this tax is riddled with problems. For one thing, it would tax unrealized capital gains which introduces numerous issues for illiquid assets and startup founders. It also is misnamed because it would affect hundred-millionaires not just billionaires.

8. Increase the corporate tax rate to 28%

The current corporate tax rate is 21%. Biden proposes raising that to 28%.

9. Quadruple the stock buyback tax to 4%

Last year, Biden signed into law a surcharge on corporate stock buybacks. That tax is currently 1%. Biden now proposes raising that tax to 4%.

10. Raise the top individual tax rate to 39.6%

Trump’s Tax Cuts and Jobs Act dropped the highest individual tax rate from 39.6% to 37%. Biden wants to repeal that change. He also proposed this last year, but it didn’t get through Congress.

11. Taxing capital gains in excess of $1 million as ordinary income

Biden proposes taxing capital gains in excess of $1 million as ordinary income. That would mean taxing such gains at 37-39.6% instead of 20%. This would have a MASSIVE impact on investment returns.

Additionally, Biden proposes taxing all investment manager carried interest as ordinary income.

12. More affordable housing

Biden’s budget proposal includes several items aimed at increasing the affordability of housing for both renters and owners:

1. $59 billion in mandatory funding and tax incentives to increase the affordable housing supply, including for extremely low-income households
2. $10 billion in mandatory funding to incentivize state, local, and regional jurisdictions to remove barriers (such as restrictive zoning) to affordable housing developments
3. $10 billion in mandatory funding for a new first-generation down payment assistance program
4. Expanding the Housing Choice Voucher (HCV) affordable rent program to cover an additional 200,000 households
5. Guaranteed housing assistance for all (roughly 20,000) youth who age out of foster care annually
6. An incremental expansion of guaranteed housing assistance to cover the 450,000 extremely low-income (ELI) veteran families in the U.S.

Budget items 1, 2, and 4 would definitely be opportunities for real estate entrepreneurs, investors, and developers to make money. Budget items 5 and 6 may also be opportunities, depending on how they are implemented. Budget item 3 would likely be an opportunity for banks, real estate lenders, mortgage brokers, and real estate brokers and agents.

13. Subsidized home energy & water utilities

Biden proposes $4.1 billion for the Low Income Home Energy Assistance Program (LIHEAP). Since the Low Income Household Water Assistance Program (LIHWAP) is set to expire at the end of 2023, Biden also proposes to expand LIHEAP funding and allow states the option of using a portion of that funding to provide water bill assistance to low-income households (effectively combining LIHEAP and LIHWAP into a single program).

14. Climate spending

Biden budgets $24 billion to:

• help build communities’ resilience to floods, wildfires, storms, extreme heat, and drought brought on by climate change
• Expand conservation and ecosystem management
• Strengthen America’s natural disaster response capabilities
• Increase the resilience of rural housing to the impacts of climate change
• Reduce the rural housing rent burden
• Make America more resilient to climate change (ambiguous)

Biden also proposes to marry climate spending to “equity and environmental justice” by requiring that 40% of federal investments in climate and clean energy be directed towards the benefit of disadvantaged communities.

The budget also includes $1.8 billion in EPA funding across numerous programs aimed at cleaning up toxic pollution sources and damage.

Additionally, Biden proposes more than $3 billion for the President’s Emergency Plan for Adaptation and Resilience (PREPARE). That would include a $1.6 billion contribution to the Green Climate Fund and a $1.2 billion loan to the Clean Technology Fund.

15. Expanded free school meals

Biden’s budget includes $15 billion to expand free school meals to an additional 9 million kids. The budget also includes $6.3 billion to support the 6.5 million individuals expected to participate in the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC).

16. Paid family & sick leave

Biden proposes a complete overhaul of family & sick leave for all workers in the U.S. The proposal includes up to 12 weeks of leave to allow eligible workers to take time off to:

• Care for a new child
• Care for a seriously ill family member
• Heal from their own serious illness
• Address circumstances arising from a spouse’s military deployment
• Find safety from domestic violence, sexual assault, or stalking

Additionally, Biden requests that Congress require employers to provide seven job-protected paid sick days each year to all workers.

17. Technology R&D and manufacturing

Biden’s budget includes hundreds of billions of dollars for technology R&D and manufacturing (although much of this has already been locked in during previous years).

• $210 billion for federal R&D
• $21 billion in discretionary spending for CHIPS and Science Act-authorized activities
• $4 billion in new mandatory funding for the Regional Technology and Innovation Hub Program at the Economic Development Administration
• $16.5 billion for climate science and clean energy innovation
• $1 billion for fusion R&D specifically

18. Increased federal law enforcement & community intervention

Biden’s budget continues to fund his Safer America Plan which includes:

• $17.8 billion for DOJ law enforcement
• $1.9 billion for the U.S. Marshals Service
• Putting an additional 100,000 police officers on the streets
• $19.4 billion over 10 years for crime prevention strategies
• $5 billion over 10 years for community violence interventions

References

[1] White House Fact Sheet: The President’s Budget Proposal for Fiscal Year 2024

[2] Fiscal Year 2024 U.S. Budget Proposals & Analyses by the Office of Management and Budget (OMB)

[3] 2023 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds

[4] Tax Foundation: Details and Analysis of President Biden’s Fiscal Year 2024 Budget Proposal