Biden: Tax Cuts Extension Expanded by the GOP to Include Wealthy Americans Could Lead to Higher Inflation


The White House is scheduled to release a new memo on Thursday, which suggests that extending tax cuts from the Trump era could contribute to rising inflation, a concern that is seen as important to voters.

In a memo that is being distributed to reporters and campaign groups, Andrew Bates, who is the White House Senior Deputy Press Secretary, has stated that the Republican attempt to extend and expand the 2017 tax cuts embodies “a MAGAnomics economic agenda that would set off an “inflationary bomb” and raise costs for families in the middle class. “

The memo was shared with Yahoo Finance before it was distributed to a wider audience.

The main topic of the memo is the 2017 tax cuts that were signed into law by then-President Trump, many of which are expected to expire at the end of 2025.

President Biden has stated that he supports extending certain parts of the law that benefit Americans who make less than $400,000 per year while allowing other provisions to expire, which would effectively increase taxes on the wealthiest Americans.

Republicans have argued against the potential economic damage that may result from raising tax rates and are advocating for a complete extension of the cuts, and even discussing additional cuts, such as further reducing the corporate tax rate.

Some conservative economists have argued that lowering taxes can help increase tax revenue because it stimulates economic growth. Even though the 2017 cuts did result in an increase in revenue, analysis suggests that it was not enough to completely cover the cost of the cuts.

The White House memo also addresses the corporate tax rate, which was decreased to 21% by Trump’s 2017 law. This provision is not expected to expire in 2025, however, Biden is promoting raising the rate to 28%, while Trump wants to reduce it to 15%.

Bates has criticized Republicans for “protecting businesses that are overcharging Americans and not cutting prices even when their profits are at record highs.”

According to new government data released on Thursday, corporate profits decreased by $21.1 billion in Q1 2024 after reaching an all-time high at the end of 2023.

Tax policy continues to be a unifying topic for Republicans. House Speaker Mike Johnson, outlined a wider approach to the tax debate in an interview with Semafor, indicating that there will be plans to address a number of issues beyond the expiration of the Tax Cuts and Jobs Act.

This stance helps bring Republicans together, even including those who are critical of Trump. In a recent interview with Yahoo Finance, former House Speaker Paul Ryan expressed that he prefers Trump’s tax policies over Biden’s, despite his general disapproval of Trump himself.

Ryan, who assisted in passing the 2017 tax cuts, issued a warning that Biden’s plan could potentially result in tax increases for medium and small businesses.

Anticipating the 2025 Tax Debate

The White House’s memo this week serves as lawmakers prepare for next year’s tax policy discussions.

Republicans have indicated plans to use the budget reconciliation process to expedite the issue if Trump is elected, which would require that the Republicans hold a majority in the House, Senate, and White House this fall. This process has been used in recent years to expedite significant legislative actions.

The reconciliation process was used to pass the 2017 Tax Cuts and Jobs Act and the Democrats’ Inflation Reduction Act in 2022.

Economists who are referenced in the new White House memo warn about the financial consequences of extending the tax cuts. Adam Tooze, a professor at Columbia University, said recently that Trump’s policies could result in inflation.

Economists have raised concerns that Trump’s larger agenda, which includes tax cuts, tariffs, and immigration policies, may add to inflation, though the extent of this is up for debate.

An analysis done by Ryan Sweet and Bernard Yaros, economists at Oxford Economics, indicated that a “complete Trump scenario” could potentially increase prices by 0.5% to 1% in 2026 and 2027.

Regarding GOP plans, Bates wrote, “Despite these warnings, Republican leaders in the House are planning to extend the Trump tax cuts for the wealthy beyond 2025.”

Budget analysts have given varying estimates for how much the tax changes will cost. The Committee for a Responsible Federal Budget has projected that extending certain parts of the law will cost $4 trillion by 2034.

The Congressional Budget Office has also examined the issue, estimating the cost to be between $3.5 trillion and $4.6 trillion by 2033, depending on assumptions about spending and revenues.

Some analysts in the market are concerned that new tax cuts and the resulting deficits may cause market instability.

Bill Gross, an experienced bond trader, told the Financial Times that “Trump is the more pessimistic candidate because of his support for continuing tax cuts and costly programs.” He added that “Trump’s election would be more disruptive.”