President Joe Biden will propose spending $1.8 trillion over the next decade to make massive investments in the nation’s education system, and to expand and protect tax credits aimed at the middle class, administration officials said Tuesday night, adding that he would pay for the ambitious agenda with a number of tax hikes aimed at the wealthiest Americans.
Biden is expected to lay out his proposal, dubbed the American Families Plan, in a prime-time speech to Congress on Wednesday.
It faces an uncertain political path forward. While an earlier legislative package from the administration, which focused heavily on infrastructure projects, could attract some support from Republicans, it’s likely this plan ― which is targeted at traditional Democratic priorities such as education and the social safety net ― will rely on the party’s narrow majorities in Congress to stay united.
The centerpiece of the plan is a massive investment in the nation’s education system, including universal, free pre-kindergarten education for all 3- and 4-year-olds and free community college for all Americans. The $200 billion pre-K plan calls for a state-federal partnership that the administration says would save the average family $13,000 annually. Spending $109 billion to make community colleges tuition-free would allow 5.5 million students to attend at no cost.
Biden is also proposing increasing the maximum Pell Grant, which helps low-income students attend college, by $1,400, to nearly $8,000, and making two years at historically Black colleges and universities and other institutions focused on educating racial minorities free for students from families making less than $125,000 a year.
The most immediately controversial element of Biden’s plan may be its tax increases on the wealthiest Americans, which could face resistance from some moderate Democratic lawmakers despite the overwhelming public popularity of increasing taxes on the rich.
Biden’s plan would return the tax rate on the wealthiest Americans to 39.6% after it fell to 37% under the GOP’s 2017 tax law. It would also tax capital gains as income for people making more than $1 million a year ― roughly the wealthiest 0.3% of American households ― and close loopholes used by hedge fund managers and wealthy families to avoid paying taxes.
The administration is also proposing spending $80 billion over the next decade to beef up the Internal Revenue Service and target it at wealthy Americans who dodge taxes. Budget cuts in recent years have forced the IRS to focus on auditing middle-income Americans instead of taking on more complicated cases.
Biden is also extending one of the key pillars of the American Rescue Plan: a monthly benefit for parents. Under the recently enacted package of COVID-19 relief, American families making up to $150,000 will get a monthly check of up to $300 per child, starting sometime after July 1. The law also instructed the IRS to send out the money from the tax credit in advance, in essence creating a child allowance ― but only for this year.
The American Families Plan would extend this boosted benefit through 2025, a four-year extension that would significantly cut childhood poverty in the United States.
While this extension is welcomed, it will come as a disappointment to a large group of Democrats in Congress, both moderate and progressive, who were publicly lobbying Biden to make the super-boosted child tax credit a permanent policy. The White House didn’t bend to that pressure.
“We must make the child tax credit permanent,” Rep. Mondaire Jones (D-N.Y.), who has made policies for parents one of his legislative priorities, told HuffPost. “It is one of the greatest things about the American rescue plan, and what has been proposed by the president — extending it to 2025— does not go far enough. We can cut child poverty in half permanently.”
The administration is also backing permanent changes to the nation’s unemployment system, tying the size and duration of benefits to economic conditions. Reforming the system has broad support among Democrats, but it fell out the coronavirus relief package passed last month because of its price tag.
If Congress doesn’t act, the current boosted federal unemployment benefits will expire in September.
There’s currently no mandated baseline for unemployment insurance in the United States, leaving wide disparities among states, and many states have fully depleted their unemployment benefit funds during the coronavirus pandemic. The Biden administration does not lay out specific reforms or propose any specific financing options for the system.
The administration is also proposing a federal paid leave program, the first of its kind in the United States. Biden wants to invest $225 billion over the next 10 years in guaranteed paid leave. By the 10th year, the program would offer 12 weeks of paid family or medical leave and would replace at least two-thirds of workers’ wages, providing up to $4,000 a month.
The United States is one of few countries in the world without guaranteed paid leave.