Here's What's in Biden's Budget

The proposal would reduce deficits for the next decade.

On Thursday, President Biden released a budget proposal for fiscal year 2024. The plan proposes sweeping changes to medical benefits, domestic and foreign investment, taxes, and entitlement programs. While the proposal in its current form is highly unlikely to pass a Republican-controlled House, the proposal could indicate the priorities of Democratic leadership. Read on, where we'll discuss the biggest impacts this plan will have on your personal finances.

Changes to the tax code

The most asked question in Washington, "Who will pay for it?" is answered in short order by the Biden administration. Biden's campaign promise that "no one earning less than $400,000 per year will pay a penny in new taxes" appears to have held true with his recent budget. However, those earning more than half a million dollars per year would shoulder much of the proposal's cost.

For some, Biden's proposal would actually lower taxes. The president's budget calls for the Child Tax Credit, which supports lower- and middle-income families, to be raised. The American Rescue Plan temporarily raised the credit from $2,000 to $3,600 per child under 6 years old during 2021, but was reverted for the 2022 tax year. Biden's proposal would not only reinstate the credit to its 2021 amount, but would also make the credit fully refundable.

The plan's funding would instead come from taxes on the wealthy. For those earning over $400,000 per year, the proposal would restore the top tax rate of 39.6%, which was reduced by the 2017 Tax Cuts and Jobs Act. Meanwhile, the budget would eliminate capital gains rates for those earning over a million dollars per year, and would close the carried interest loophole. Billionaires would be subject to a 25% minimum tax rate under Biden's plan. The proposal would also raise taxes on corporate profits, stock buy-backs, and offshore accounts.

Changes to Medicare

Biden previewed the release of his budget with an opinion piece in the New York Times early this week. In the article, Biden restated his commitment to funding the Medicare program, which serves some 60 million Americans and is currently projected to become insolvent by 2028.

One of the key focal points of the Biden budget is allowing Medicare to lower costs internally. Prior to 2022, the program was unable to negotiate drug prices, leading in part to a majority of the program's prescription budget being spent on only a few dozen proprietary drugs. The 2022 Inflation Reduction Act allowed the program to negotiate prices on a limited number of drugs. Biden's proposal would expand that power and, by his estimation, reduce Medicare spending by $200 billion.

The Medicare program and other entitlements have been a target for conservative politicians for many years. A 2023 budget proposal by the Republican Study Committee suggested reducing Medicare and Social Security budgets in a bid to rein in government spending. Republicans, who have demanded reduced government spending in exchange for a debt ceiling crisis resolution, have not yet provided a spending bill of their own. The timing of the Biden administration's proposal could be an attempt to force the Republicans' hand to release a proposal of their own, which would likely include unpopular cuts to entitlement program spending.

Domestic investment

The budget proposal would continue to build on President Biden's education reform initiatives. The maximum award offered through a Pell Grant, a grant for students with exceptional financial need, would be doubled over the next decade. Additionally, federal funds would be committed to expanding free community college across the nation.

Families would also see new benefits as a result of the proposal. The budget would institute a mandatory three month paid family and medical leave for workers and their families facing a medical crisis. All workers would also be entitled to seven paid sick days without jeopardizing their employment.

Biden's budget proposal would make broad changes to tax code, entitlement programs, and domestic investment. But it should be understood that the proposal will almost certainly not be passed by a Republican-led House. The road to a budget resolution is a long one, but having a budget to negotiate is the first step.