Via Teleconference
(April 27, 2021)
7:01 P.M. EDT
SENIOR ADMINISTRATION OFFICIAL: Hi, everyone, and thank you for joining us. This evening, we’re joined by senior administration officials to give you an embargoed preview of President Biden’s American Families Plan, which will be unveiled tomorrow.
This call is on background, attributable to “senior administration officials,” and the contents will be embargoed until 5:00 a.m. Eastern, tomorrow, April 28th. By joining this call, you are agreeing to these ground rules.
Just for your awareness, and not for reporting, joining us today will be [senior administration officials].
You should soon receive an embargoed factsheet providing an overview of the American Families Plan. This factsheet is also embargoed until 5:00 A.M. tomorrow.
At the end, we’ll open it for a few questions. You can press the “raise hand” button, and we will try to get to your question. With that, I’ll turn it over now to our speaker.
SENIOR ADMINISTRATION OFFICIAL: Hi Everyone. Thanks for joining us tonight. [Senior administration official] and I wanted to take a few minutes to walk you through the contours of the American Family Plan, which the President will unveil tomorrow night in the joint address.
The American Rescue Plan is already changing the course of the pandemic and providing immediate relief to families and communities across the country. But the President knows we need to do more to build a stronger economy that doesn’t leave anyone behind.
The American Jobs Plan and the Families Plan are once-in-a-generation investments in our nation’s future. The American Jobs Plan will create millions of good jobs, rebuild our country’s physical infrastructure and workforce, and spark innovation and manufacturing here at home.
The American Families Plan invests in our children and our families, helping families cover the expenses that so many struggle with now: lowering health insurance premiums; cutting child poverty; and producing a larger, more productive, and healthier workforce in the years ahead.
So let me go through some of the details before turning it over.
First, the American Family Plan will add at least four years of free education for every student. It will make transformational investments from early childhood to higher education so that all children, young — so that all children and young people are able to learn and grown and gain the skills they need.
Specifically, it will provide universal high-quality preschool to all 3- and 4-year-olds. It will provide two years of free community college to all Americans who wish to attend. It will provide up to $1,400 in additional assistance to low-income students by expanding the maximum Pell Grant. That’s about a 20 percent expansion.
It will invest in making college more affordable for low-income students and students at Historically Black Colleges and Universities, Tribal Colleges and Universities, and other Minority-Serving Institutions; and provide grants to these institutions to create or expand educational programs in high-demand fields.
And the American Families Plan is going to invest in completion and retention activities at colleges and universities that serve high numbers of low-income students and where the challenge of graduation remains real.
The plan will also invest in our teachers, improving teacher training and support so that our schools become engines of growth at every level. It will address teacher shortages, which have only gotten more critical in the context of the pandemic. It’ll improve teacher preparation and strengthen pipelines for teachers of color.
It’ll help teachers earn credentials in high-demand areas like special ed, bilingual education, and certifications that improve teacher performance. And it’ll support programs that leverage teachers as leaders, such as high-quality mentorship programs for new teachers and teachers of color.
Thirdly — secondly — I’m sorry — the plan also provides direct support to children and families by investing in affordable childcare by providing direct support to families to ensure that low- and middle-income families can pay no more than 70 — excuse me — no more than 7 percent of their income on high-quality childcare.
It will invest in the childcare workforce, funding childcare providers and their workers, ensuring a $15 minimum wage is in effect for early childhood staff, along with improved training. And it will direct support to workers and families in the form of a national comprehensive paid family and medical leave program so that workers can better manage their job, their health, and their family.
The American Families Plan, thirdly, also tackles the nutritional needs of children by expanding the summer benefits to all eligible children nationwide — these are children who have free and reduced school lunches and breakfasts during the school year — and expanding that meal program to the summer on an ongoing basis. And this will reach an estimated 9.3 million children.
It will also expand the number of schools that are able — in low-income areas — to provide free and reduced school lunches. And it’ll launch a billion-dollar healthy foods incentive demonstration. All of which are aimed at not just tackling hunger, but improving nutrition and long-term health outcomes for today’s children and tomorrow’s adults.
On the tax side, finally, the Families Plan will extend key tax cuts that were in the American Rescue Plan that benefit, in particular, lower- and middle-income workers and families.
And these include, extending the Affordable Care Act tax credits, which were in the ARP, permanently, in order to permanently lower health insurance premiums. The average relief that is provided under, now, the ARP, which would be extended, amounts to an estimated average of $50 per person per month. And that will benefit some 9 million people.
Next, it extends the Child Tax Credit increases in the ARP through 2025 and it makes the CTC permanently and fully refundable. It permanently increases tax credits to support families with childcare needs, including making permanent the temporary Child and Dependent Care Tax Credit expansion that was in the ARP.
And, finally, it’ll makes permanent the Earned Income Tax Credit Expansion for Childless Workers, which was also in the ARP, which has benefitted 17 million low-wage workers, many of whom were essential workers, including cashiers, cooks, delivery drivers, food workers, and childcare workers.
So those are the key elements of the Families Plan on the investments side. And let me turn it over to [senior administration official] to talk about how we finance these investments.
SENIOR ADMINISTRATION OFFICIAL: Hey. Thanks, [senior administration official]. And good to be with all of you tonight. So, I want to make one point about the overall economic framing of the package and then talk about the overall cost, and then — and then — and offsets.
The first point that I want to make is just to underscore a point that [senior administration official] made, which is: We view the American Families Plan as a core element of President Biden’s strategy to build back better and generate a strong and inclusive economy for the future.
There is a wealth of economic research that shows that the investments proposed in the American Families Plan will yield significant economic returns, boosting productivity and economic growth; producing a larger, more productive, and healthier workforce on a sustained basis; and generating savings to state and the fed- — of states and the federal government.
This evidence is overwhelming — evidence that a dollar invested in high-quality early childhood programs results in more than $7 in benefits, including increased wages, improved health, reduce cli- — crime, similar paid parental leave. It shows it keeps mothers in the workforce, increasing labor force participation, boosting economic growth. And providing sustained tax credits for families with children has been found to yield a lifetime of benefits, ranging from higher educational attainment to higher lifetime earnings.
In short, these are about the highest value economic investments we can make for our future economic competitiveness. In total, the plan that [senior administration official] just outlined — the American Families Plan — consists of about $1 trillion in investments over a 10-year period and $800 billion in tax cuts for American families and workers.
And alongside the American Families Plan, the President will be proposing a set of measures to make sure the wealthiest Americans pay the taxes that they owe, while also ensuring that no one making less than $400,000 per year will see their taxes go up.
And these reforms are fundamentally about fairness in the tax code. And in combination with the American Jobs Plan, which produces deficit reduction through corporate tax reform, all of these investments would be fully paid for over a 15-year period.
Just to speak specifically about the tax reform provisions the President will speak to and propose alongside the American Families Plan: First, tax enforcement. Just for a little bit of context: From 2011 to 2018, the audit rate for those making over a million dollars per year fell by 80 percent.
In America, today, taxpayers are more likely to be audited if they live in the Mississippi Delta than if they live on Park Avenue. The President’s plan would change this and really get at a fundamental element of fairness in the tax code — making sure that the taxpayers are paying the taxes they already owe — with two significant steps.
The first would be to require financial institutions to report information on account flows so that earnings from investment and business activity are subject to more of the reporting, like wages of the vast majority of working Americans already are.
The second would be to increase investment in the IRS through mandatory funding that would ensure that additional resources go toward enforcing tax compliance among those with the highest incomes.
I want to underscore that, as part of this plan, audit rates for Americans making less than $400,000 a year would not increase relative to recent years. The focus of these steps will be to focus additional capabilities and resources on large companies, businesses, estates and higher-income individuals where the — the majority of the underreporting and tax non-compliance currently is.
Second, the President’s — will propose to — to reverse the 2017 tax cuts reduction of the top individual income tax rate, returning that top rate to 39.6 percent — a change that would apply only to the top 1 percent of taxpayers.
Third, for households making over a million dollars a year, the President’s plan would tax capital gains at the same rate as ordinary income. This change — some of you may be sick of me — hearing me say this — will only apply to the top three tenths of 1 percent of taxpayers. Not the top 1 percent. Not the top one half of 1 percent. Only three out of every thousand taxpayers.
By equalizing the treatment of capital gains and ordinary income, this plan would also eliminate the so-called “carried interest loophole,” which allows private equity managers to report their earned income as carried interest and enjoy lower capital gains rates.
And fourth, the President’s plan would address the very significant loophole in our existing tax code that allows the — the wealthiest Americans to entirely avoid income taxes on their gains by holding assets for their entire lifetime and passing it on to their heirs. This is sometimes referred to — this is technically a step-up basis. This will also enhance our ability to actually rate — raise revenue from the capital gains system.
This reform will be designed with explicit protections so that family-owned businesses and farms will not have to pay taxes when they give — when given to heirs who continue to run those businesses.
The — the basic logic for these last two changes is about rewarding work in our tax code and not just wealth — something that the President has spoken to on the campaign and as President consistently. The conceptual framework for equalizing the tax treatment of capital gains and ordinary income is neither new nor — new nor — nor novel. It was a key feature of President Reagan’s tax reform where he increased capital gains rate to match the personal income tax rate.
So those are the — those are the key elements of the tax reforms that the President will be proposing — again, alongside the American Families Plan — to lay out a framework for how to make these critical investments in our future economic competitiveness in a way that is fiscally sound.
And we’ll be encouraging, as he has in the context of the Job Plan, an openness to others’ ideas and an openness to a conversation, but a commitment that these are investments that we can’t afford not to make as a country.
SENIOR ADMINISTRATION OFFICIAL: Great, thank you so much. You can press the raise hand button, and we will try to get to your question. I see some hands are already raised. So we’ll open it up now.
And just a reminder that the contents of this call are on background, attributable to “senior administration officials,” and under embargo until 5:00 a.m. Eastern.
Q Thanks so much for doing this call. My question is the timeline for all of this. I was looking at the factsheet and listening.
So, when it comes to universal pre-K, you know, the help with childcare, and also the Community College payments — when would these things actually come to pass? Like when would this be set up? Over — is there a deadline? Can you walk through some of when — if the — if this bill was passed, when some of this would happen?
And also just following up on that: Can you just generally address how you plan to convince lawmakers in Congress to embrace some of these tax increases? Especially considering that there’s already talk that — from Republicans and some Democrats, that some of these tax increases are nonstarters?
SENIOR ADMINISTRATION OFFICIAL: Let me start, perhaps, with the first part of your question on the programs, and [senior administration official] and I will answer that. And then [Senior administration official] will want to talk about the tax side further.
But the broad — in the broadest sense, these are generational investments in our future — in the future of our families, in the future of our kids. And as [senior administration official] outlined, they pay enormous dividends, each of them. And, you know, it’s a wise investment in our collective future by any economic standard.
But getting to your particular question, Ayesha, and — broadly speaking, this is a 10-year program — the American Families Plan. That’s the window. And you know, many of these things will become permanent. They — they phase in at different times in different ways.
So, some are immediate. Some, like paid leave, have a ramp-up. Some have, you know, like pre-K — you know, a different share that is paid overtime on a sliding basis by states starting at a, you know, low end, the amount that states pay, and as time goes on, an expectation that they will pay more.
So, we can — we can go through each of those in a bit of depth, but it’s not uniform, and it’s — it depends on the program. [Senior administration official], do you want to add anything?
I don’t know if you are on mute.
SENIOR ADMINISTRATION OFFICIAL: Sorry. Can you hear me now?
SENIOR ADMINISTRATION OFFICIAL: Yes.
SENIOR ADMINISTRATION OFFICIAL: Great. Yeah, exactly –exactly what you said, [senior administration official] — that there — each will be different. But some of them, like the childcare program, will be building on an existing infrastructure at the state-level based on an existing program — program called the Child Care Development Block Grant.
So, there — they’ll still be a need to scale up capacity, but there’s an infrastructure that exists. Some of them will have to phase it in as — as we partner with states to put in place these new generational programs that will come into place over the 10-year window.
SENIOR ADMINISTRATION OFFICIAL: [Senior administration official], do you want to —
SENIOR ADMINISTRATION OFFICIAL: Sure. Yeah, let me just quickly pick up on the issue of taxes. Look, the President’s plan makes clear where he believes we should be reducing tax burden and where he thinks we should appropriately increase the — increase taxes.
His plan is about cutting taxes for middle-class families, for childcare, for healthcare, and for families. And he believes that we should — we should do that in a fiscally responsible way, first and foremost, by making sure the wealthiest Americans actually pay the taxes they already owe.
There is broad support among the American people for this approach. There’s broad support from the American people for the investments that the — that these resources will go to. And what you’ll hear the President explain tomorrow night is, if — if people have other ideas about how to — to finance these critical investments, he is open to hearing them.
If people have other approaches that they want to put on the table, that’s the process he wants to encourage. But he — but he — he believes that, you know, these issues of fa- — of tax fairness, of making sure that people actually pay the taxes that they already owe, are — are fundamental and necessary.
And we’ve heard from, you know, former IRS commissioners in Republican and Democratic administrations about these persistent challenges.
So that’s the plan that he’s going to be put- — putting forward, and he’s going to seek other people’s inputs on where they would prioritize and what that reflects in terms of the values they want to — they want to — they want to drive.
Q Hey, thank you very much. I wanted to ask about the pre-K proposal. It is described as universal, so I just want to confirm: That would be available to families at all income levels and there would not be any sort of cap in terms of more affluent families taking advantage of the program.
SENIOR ADMINISTRATION OFFICIAL: That is correct.
Q Thank you, [senior administration official]. One thing that’s not in the plan — I know you’ve been asked to do it — was to repeal the $10,000 cap on state and local tax deductions, which, while most of the benefits may go to millionaire — to millionaires, it also affects a lot of middle-class homeowners in high-tax states like New Jersey, New York, California. Why is that not part of the plan — a raising of the cap?
SENIOR ADMINISTRATION OFFICIAL: Sure. Look, the — the elements of the plan the President will lay out tomorrow will reflect his approach on where we need to invest in children and families and then how are — what is — what are fair and smart ways to pay for that.
The SALT deduction, obviously, is something that costs money. And so, we — we recognize and have heard from others who are prioritizing that, and that’ll be part of the conversation going forward.
The President’s plan is really about where he would prioritize investments in children and families, and then ideas for how to offset that — the cost of those investments.
Q Hi. Thanks so much for taking my question. I know you said it’s a 10-year plan in terms of how it’s going to be implemented, but I’m wondering if you could give a little bit more clarification on when the administration might want to see this passed.
And at the same note — it’s probably, I guess, a related question, if anything: When do you — when do you hope parts of this plan go into effect immediately? Like, is there a priority list of what needs to happen first?
SENIOR ADMINISTRATION OFFICIAL: We’d like to see it pass as soon as possible. (Laughs.) That one’s a — simple. And, no, all of this begins at passage, Yamiche. It’s a question of how they — how it ramps up. And some things are immediate — for example, you know, the increase in Pell Grant would be immediate for those — you know, if it were passed over the summer, presumably in the next fiscal year.
So — and other things begin immediately, but take some time to fully ramp up, like paid family and medical leave. In the early years, there’ll be not as many weeks of paid family and medical leave. By the 10th year, it would be the full 12 weeks — 12 weeks for all different types of leave.
Q Hi, everybody. Thanks for doing this. So, in the — in the document, you describe the universal pre-K as a partnership with states. And I am wondering, given the experience with Medicaid expansion under the ACA, both for the universal pre-K and the community college, do states have to agree to participate in order for people in that state to gain benefits here? Or will this be available in every state regardless of what governors choose to do — both sides, universal pre-K and the community college.
SENIOR ADMINISTRATION OFFICIAL: [Senior administration official], do you want to take that?
SENIOR ADMINISTRATION OFFICIAL: Yeah, in both of those programs, it is — they are contemplated to be federal-state partnerships. But we are also — have provisions so that if a state does not participate, we would work directly with a locality on preschool. And with respect to community colleges, we’d look for ways to partner with institutions in those states.
That said, you know, that — both preschool and community college is something that has received a lot of bipartisan support at the state level. For example, in Tennessee, through leadership from a Republican governor, there’s — there was a move to make community college free. There’s Republican governors that have embraced universal preschool. So we’re hopeful that we’ll be able to fully realize the program with partnerships with states.
Q Thanks very much. I’m wondering if you could tell us — the same question about community colleges was for pre-K — is it a universal benefit that doesn’t depend on family income? And also, roughly, on the community college and the pre-K programs, what’s the — what’s the share of state versus federal contribution?
SENIOR ADMINISTRATION OFFICIAL: Yes, it’s a universal benefit — community college. And, [senior administration official], do you want to talk about the second part of the question?
SENIOR ADMINISTRATION OFFICIAL: Yes. With respect to both programs — the state contribution — it’s a little bit different under each. But with respect to preschool: starts with the state covering 10 percent of the cost and phases-in over time to about 50 percent of the cost.
And then for community college, it’s a little bit different. It depends on the cost of tuition in that — in that state. It’s — the federal share would be — we took the average cost of community college, and the federal share is — is designed, at full implementation, to be 75 percent of that cost, which would mean the state would cover the other 25 percent.
But states would have the ability to spend more, obviously. And states would be expected to maintain their current contribution to their post-secondary system. So, they couldn’t take this money and reduce the amount that they’re contributing to post-secondary education.
Q Hi. Thanks. I wanted to ask about healthcare. You’ve gotten a lot of letters from congressional Democrats across the ideological spectrum pushing for both lowering the Medicare eligibility age and including drug pricing legislation in this package. It looks to me like, other than the ACA subsidy extension, those big healthcare things are not in here. So, I wonder if you could address why they’re not? Thanks.
SENIOR ADMINISTRATION OFFICIAL: The American Families Plan makes the critical investment in ensuring that the premium reductions that were provided for — for two years under the American Rescue Plan are made permanent. And that is one of the most impactful investments we can make, both in terms of reducing the costs of health insurance for those who buy it on their own, as well as making it more accessible and thus expanding coverage to those who have not previously had health insurance.
The President has been very, very clear that he remains fully committed to negotiations to reduce prescription drug prices — that, you will hear him reiterate as a very top priority and something he deems urgent.
And, you know, the flip side of that is that, you know, by reducing prescription drug prices, not only do you provide relief to millions of Americans who are buying prescription drugs every day, but you’re also generating revenue that can be applied to both expanding coverage to those places in the country that have coverage gaps still, but also expanding the benefits of Medicare itself.
Q Hi, there. Thanks so much. I really appreciate it. I was hoping maybe you could explain, on the childcare piece of this: Who exactly would this apply to? Do you envision an income cutoff? It doesn’t make clear to me who — who will be getting the benefits?
SENIOR ADMINISTRATION OFFICIAL: Yeah. Good question. [Senior administration official], why don’t you take this one too?
SENIOR ADMINISTRATION OFFICIAL: Yeah. So, with respect to the program that — that provides direct support to families: It would provide support on a sliding scale for families up to 150 percent of state median income. So, basically, targeting low-income and middle-income families.
And the amount that they would pay for childcare would be capped at 7 percent of their income. Very low-income families, the — the support would fully cover the cost of childcare. And the amount provided would be tied to high-quality care. So — so we’d be able to cover the cost of high-quality care.
We’re also proposing — and that — that benefit would be for care connected with small children — so children from zero to five; so think prior to school age. It would also provide for wraparound care for those attending preschool, including the new Universal Preschool Program. So, those programs that they don’t cover the full amount of time that a family needs — that program would help to provide families with support.
We also, though, would make permanent the expansion of the Child and Dependent Care Tax Credit, which was included in the Rescue Plan. Under that proposal, it would be a refundable tax credit, so low-income families could — could participate in that program. And families up to $125,000 in income per year could qualify for the maximum benefit, which is $4,000 for one child or dependent, and $8,000 for two or more dependents.
That tax credit does — if you make more than $125,000 per year, you could still get and qualify for a partial credit, but it does phase out at $400,000 a year.
SENIOR ADMINISTRATION OFFICIAL: Great, thank you, [Senior administration official.] So, thank you, everyone. One more reminder that the contents of this call are under embargo until 5:00 a.m. tomorrow Eastern, and on background, attributable to “senior administration officials.” Please reach out to me and others on our press team if you have any additional questions. Have a great night.
7:34 P.M. EDT
