The differences couldn’t be more stark. Promises to “build back better” from Covid-19 have been made on both sides of the Atlantic. But as lockdown measures are steadily relaxed, President Joe Biden is showing far greater ambition than Boris Johnson’s government when it comes to shaping the post-pandemic recovery.
This week, Washington will set out plans for the most comprehensive reforms of American tax policy in half a century, alongside trillions of dollars in funding for investment to tackle deep-rooted inequalities.
In a measure that is expected to reverse years of tax cuts that have benefited the wealthiest in society, tax on investment gains will be almost doubled, from 20% to 39.6%, for Americans with earnings of $1m or more. A 3.8% tax on investment income used to fund Obamacare will also be retained, which takes the US’s top rate as high as 43.4%.
Biden is also preparing to raise the top marginal income tax rate to 39.6% from 37% as a way of bringing parity between taxation of returns from wealth and from work.
There are two important issues to consider. First, whether the most ambitious version of Biden’s plan will pass through a divided Congress. The president will require unanimous Democrat support, given expected fierce opposition from Republicans. Second, there are concerns about inflation, as the stimulus plan turbocharges US growth.
However, the risks from lasting damage for the poorest in society, as well as the need to tackle inequalities in the US dating from long before Covid, mean a sweeping package of stimulus measures and structural tax reforms are the only way the “build back better” pledge will mean anything more than a political soundbite.
At the budget, Sunak raised corporation tax, arguing he could because Biden was also increasing taxes on company profits
In contrast, the measures outlined by the chancellor, Rishi Sunak, at last month’s budget are positively timid. Rather than rekindle the spirit of economic reform that followed the second world war, as in the US, Britain gets freeports and a furlough extension until the autumn.
The government has toyed with ideas similar to Biden’s but hasn’t come anywhere close to following