On March 11, President Joe Biden presented his fiscal year 2025 budget to Congress, featuring tax increase proposals amounting to nearly $5 trillion targeting corporations and individuals earning over $400,000. Many elements of this proposal, like raising the corporate tax rate to 28% and a 25% minimum tax for high earners, have been part of Biden’s previous budget plans. The FY 2025 budget, however, introduces new measures, such as raising the corporate alternative minimum tax from 15% to 21% and restricting business deductions for employee compensation exceeding $1 million.

The relevance of President Biden’s FY 2025 budget lies in its role as an indicator of his tax policy priorities, particularly if he secures re-election. Although the current Congress, where Republicans hold the House majority, is unlikely to consider these tax proposals, they set the stage for future fiscal discussions.

The imminent expiration of critical aspects of the 2017 Tax Cuts and Jobs Act (TCJA) at the end of 2025 necessitates legislative action to avoid widespread individual tax hikes. The fate of Biden’s tax proposals in a possible second term hinges on the political composition of the next Congress, especially the control and margin in the House and Senate.

During his first two years in office, Biden faced challenges in advancing his key tax proposals on corporate and individual taxes, despite a narrow Democratic majority in both chambers. The Senate proved particularly challenging, with the possibility that even a single additional Democratic seat could have changed the outcome. Looking ahead, Republicans in the upcoming Congress may have to consider some of Biden’s tax proposals in a compromise bill to maintain TCJA provisions beneficial to families and small businesses.