Biden’s Tax Proposals Part 2

As part of an extensive package of tax increases, Biden proposes eliminating the Trump Tax cuts.

Contrary to the White House claims, preserving the Trump tax cuts will not starve the federal government’s income. House Ways and Means Chairman Jason Smith (Missouri)notes that “The truth is, the Trump tax cuts resulted in economic growth that was a full percentage point above CBO’s forecast, and federal revenues far outpaced the agency’s predictions. In fact, under Trump tax policies in 2022, tax revenues reached a record high of nearly $5 trillion, and revenues averaged $205 billion above CBO predictions for the four years following implementation of the law. Beyond what the Trump tax cuts did for economic growth and federal revenues, it provided major benefits to working families. The officially reported poverty level fell to its lowest rate in 50 years and unemployment rates for minorities and those without a college degree hit all-time lows. Real median household income rose by $5,000, and wages went up by nearly 5 percent. Americans earning under $100,000 saw an average tax cut of 16 percent. And while the tax burden on low-income families went down, the top one percent saw their share of federal taxes go up…On the other hand, President Biden’s promise for the expiration of the Trump tax cuts, means a family of four making $75,000 today will owe Uncle Sam an extra $1,500 in taxes. The Child Tax Credit will be slashed in half; small businesses will see their tax rates top 40 percent; and farmers may have to weigh selling the family business to pay a rising death tax. In his budget, President Biden has called for upwards of $7 trillion in new taxes.”

The Tax Foundation estimates that the “…tax changes in the president’s budget would reduce long-run GDP by 2.2 percent, the capital stock by 3.8 percent, wages by 1.6 percent, and employment by about 788,000 full-time equivalent jobs. The budget would decrease American incomes (as measured by gross national product, or GNP) by 1.9 percent in the long run, reflecting offsetting effects of increased taxes and reduced deficits, as debt reduction reduces interest payments to foreign owners of the national debt. Raising the corporate income tax rate to 28 percent is the largest driver of the negative effects, reducing long-run GDP by 0.9 percent, the capital stock by 1.7 percent, wages by 0.8 percent, and full-time equivalent jobs by 192,000.”

A CATO analysis presents a grim description of what the tax hikes would result in. “The Biden tax hikes would primarily fall on capital income, leading to less domestic investment, fewer jobs, and slower economic growth. According to estimates from the Tax Foundation, the budget proposal would reduce long‐run GDP by 2.2 percent, hurt wages, and eliminate 788,000 jobs. This is likely a significant understatement of the negative economic effects. The analysis notes that the budget’s proposals will make America an international outlier on individual and corporate taxes…The United States currently exceeds the OECD average in all four tax measures. The charts also show that under Biden’s budget proposals, American tax rates move from just above average to an outlier nation, with some of the highest tax rates in the OECD.”

The American Enterprise Institute emphasizes that “Although his proposals would raise significant revenue, they would not significantly affect the federal government’s short-run and long-run debt burden… in the long term, his plan would not raise enough to stabilize debt-toGDP and would lead to a 0.2 percent smaller economy.”

Illustration: Pixabay

Quick Analysis

Long Term Effects of Putin’s Ukraine War

“The war in Ukraine is leading both Moscow and Kyiv to engage in increased cyberattacks that are destructive to both infrastructure and civilian lives from meddling with energy networks to manipulating people into committing violent acts,” according to Luke Rodeheffer of the Jamestown Foundation. Both sides are engaging in activities that will leave their mark on the world for years to come as the war has increasingly blurred the lines of official state actions and those of non-state cyber actors. Criminal hacking groups and official intelligence organizations are developing working relationships that offer attractive opportunities to collaborate with good pay. As the kinetic war drifts into the cyberspace domain, some members of government agencies are moonlighting as hackers and coordinating their activities over the Internet. Early on in the war Mykhailo Fedorov, Ukraine’s Minister of Digital Transformation, announced that the country needed a volunteer Information Technology (IT) Army capable of coordinating activities against Russian targets using Telegram. Today that IT Army distributes free hacking tools to its volunteers for conducting cyberattacks on the Russian infrastructure and companies. Using tens of thousands of network devices, Ukraine’s volunteers have had success in performing distributed-denial-of-service attacks. “Ukraine has conducted a large-scale call center fraud operation targeting Russia, particularly older and more gullible Russian citizens, which is forcing the Russian state to increase surveillance on communication networks,” says Rodeheffer. In late June the IT Army overwhelmed Russian target Internet infrastructure with “connection requests” that ultimately led to interruptions in Mir, Russia’s national payment card system, according to Lizzie Simpson writing for Habr. She quotes a Forbes interlocutor in the Russian information security industry as saying: “The attack is 100%, and this is the work of the IT army of Ukraine.” Confirmed attacks such as the Mir incident are changing the character of warfare and are challenging for international security networks to control. The intensity and breadth of the attacks continues to increase on both sides of the conflict, however, it started long before the invasion. As early as 2010, there are indications Russia engaged in destructive cyberattacks against Ukraine. One of the most egregious strikes occurred in the winter of 2015 against the country’s power grid. Years before the invasion of Ukraine, Russia used hacks to shut down the computer infrastructure of TV channels in the country, according to an expert involved in the investigation of one of the episodes. Russia carried it out in a “multi-stage secret infection of information networks,” says Vsevolod Nekrasov of Epravda. Russia often employs these weapons against Ukraine in its current war effort against the civilian infrastructure. Using malware capable of permanently erasing data, Russia is seen as the likely sponsor of last December’s attack on Kyivstar, Ukraine’s largest telecommunications company. It resulted in extensive interruptions in telephone and Internet services that disabled the country for weeks. Kyivstar called it “catastrophic” at the time. In April, a response by a Ukrainian security services linked group called “Ukrainian Blackjack,” responded in kind by targeting a Russian data center utilized by several Large Russian companies and defense-related conglomerates. NV.ua reports that the group destroyed 300 terabytes (TB) of data. A DVD-R holds 4.7 GB. One would need 63,830 DVD’s to hold 300 TB of data! Ukraine has also targeted public figures in Russia linked to the war including high-ranking Duma members and policymakers focusing on the Middle East and Central Asia. Two of those, Alexander Babakov and Semyon Bagdasarov were close confidants of Putin. Their emails exposed sensitive detailed plans on how Russia planned to work with Iran to avoid sanctions. Simultaneously with the increase in cyberattacks, is a corresponding rise in cybercrime aimed at the Russian citizenry. Many of these incidents were in the form of fraud calls tricking Russians into transferring money out of the country or revealing personal information, according to RIA Novosti. “The scale of Ukrainian cybercrime has provided Moscow with additional justification to bolster its internal communications surveillance systems, under the auspices of detecting fraudulent phone calls,” says Rodeheffer. Radio Svoboda is reporting that it is also being used as an excuse to rush the integration of the occupied regions of Ukraine into Russia’s telecommunications systems and SORM, the communications surveillance system. What is most problematic is that the criminal elements involved may make it difficult to dismantle this “underground” after the war ends, says Rodeheffer. What is tolerated during a war, including the need for questionable characters with technical expertise, may lead to a new type of 21-century warfare that extends beyond the current geography of the Russia-Ukraine conflict. It could end up as a battle for the survival of both Western military and civilian infrastructures.