In his State of the Union Address, President Joe Biden outlined his vision for America's economic future, promising to prioritize tax increases for wealthy individuals and corporations while striving to improve prospects for the middle class. The proposed measures received positive feedback from economists, who highlighted their potential to address the ballooning U.S. debt.

One notable proposal was the introduction of a billionaire's tax, which would establish a minimum 25% tax for the nation's 1,000 billionaires. This measure is estimated to generate around $500 billion in revenue over the next decade. Experts view this tax as a sensible approach to tackling the long-term fiscal problem, as it would impact funds with relatively little effect on economic output.

The current U.S. debt stands at a staggering $34 trillion, and it is projected to increase by an additional $20 trillion by 2033, according to a Congressional Budget Office report. Addressing this federal debt has become one of the most pressing long-term challenges facing the country, making revenue-raising proposals appealing to economists like Bruce Sacerdote, an economics professor at Dartmouth University. Sacerdote believes that proposals which raise revenue without severely hindering economic activity make sense in this context.

Another key aspect of Biden's tax plan is the increase in the corporate tax rate to 28%, surpassing the 21% rate implemented under the 2017 tax cut measure. Although this rate would remain lower than the 35% rate in place before the tax cut enacted by former President Donald Trump, the proposal has received positive feedback from economists. By raising the minimum tax for large corporations to 21%, Biden aims to expand upon the global minimum rate of 15% established in recent years.

While economists acknowledge the potential benefits of these tax hikes in generating additional revenue and reducing the federal debt, they do express concerns about the potential negative impact on economic performance if some corporations choose to relocate abroad to avoid the higher taxes. Notably, business investment in the U.S. from typical firms that received the 2017 tax cut increased by 20%, according to a recent working paper released by university researchers and the U.S. Treasury. However, the study found that this boost in investment did not fully make up for the lower tax rate, leading to an increase in the nation's debt.

Acknowledging these concerns, economists like Steve Allen of North Carolina State University's Poole College of Management emphasize the importance of coordinating corporate tax increases with other countries. By working together to establish a global minimum corporate tax rate, the risk of corporations fleeing abroad can be mitigated.

Overall, President Biden's proposals to raise taxes on the wealthy and corporations have garnered positive responses from economists. While there are concerns about potential economic repercussions, experts believe that these measures could significantly contribute to addressing the U.S. debt crisis. The importance of global coordination in implementing these tax hikes is underscored as a means of maintaining economic stability and preventing corporate flight.