The President’s FY 2025 Budget lays out President Biden’s plan to lower costs for families, invest in America and the American people, uphold the President’s commitment to protecting and strengthening Medicare and Social Security, and reduce the deficit.
Alongside major reforms to the individual and corporate tax codes to ensure that the wealthy and big corporations pay their fair share, the Budget cuts wasteful spending on Big Pharma, Big Oil, and other special interests, cracks down on systemic fraud and identity theft, and makes programs more efficient and cost-effective. These proposals build on measures President Biden has already signed into law, including the first-ever Medicare prescription drug negotiation program, a new minimum tax on the largest corporations, and investments to ensure that the wealthy and large corporations pay the taxes that they owe. All told, the President’s Budget improves the fiscal outlook by reducing the deficit by about $3 trillion over the next decade. The Budget is able to achieve this deficit reduction even while making investments that lower costs for families, strengthen our economy and our future, and protect the most vulnerable Americans because it proposes tax reforms to ensure the wealthy and large corporations pay their fair share and tackles wasteful special interest giveaways.
Congressional Republicans have so far rejected this approach to reducing the deficit, just as they have rejected reducing the deficit by asking the wealthy and big corporations to pay their fair share in taxes. In fact, Republicans are actively fighting to increase giveaways to Big Pharma and Big Oil and make it easier for the wealthy to cheat on their taxes. Meanwhile, Republican members of Congress continue to propose cuts to Social Security, Medicare, Medicaid, the Affordable Care Act, and other programs critical to seniors and middle-class and working families.
President Biden will always reject cuts that take away people’s health care, raise costs for seniors, people with disabilities, middle-class families, and students, increase poverty, or reverse our economic progress. But—as his Budget shows—he stands ready to work with members of both parties to cut wasteful spending on special interests and crack down on systemic fraud.
Cuts Wasteful Spending on Big Pharma
Building on the prescription drug reforms in the Inflation Reduction Act, the President’s Budget:
Negotiates Lower Drug Prices and Expands Access to Prescription Drugs. Thanks to action taken by this Administration, millions of seniors and people with disabilities are saving money on their drug costs, and the Administration announced the first ten drugs for which prices will be negotiated by Medicare as it continues implementation of the Inflation Reduction Act. The Budget builds on this success by significantly increasing the pace of negotiation, bringing more drugs into negotiation sooner after they launch, expanding the Inflation Reduction Act’s inflation rebates and $2,000 out-of-pocket prescription drug cost cap beyond Medicare and into the commercial market, and other steps to build on the Inflation Reduction Act drug provisions.
Strengthens the Medicaid Drug Rebate Program. While drug manufacturers are already required to pay rebates to Medicaid, the Budget will give the Department of Health and Human Services the authority to negotiate additional, supplemental Medicaid drug rebates on behalf of states in order to pool and increase purchasing power. In addition, the Budget allows states to extend Medicaid drug rebates to separate Children’s Health Insurance Programs. These actions will reduce federal spending by almost $7.5 billion, help lower prescription drug spending, and ensure that both states and the federal government are prudent purchasers of prescription drugs.
Cuts Other Wasteful Spending on Special Interests
The Budget proposes to eliminate wasteful corporate subsidies, whether these are delivered through federal programs or through the tax code. The President’s Budget:
Eliminates Tax Subsidies for Oil and Gas. The President is committed to ending tens of billions of dollars of federal tax subsidies for oil and gas companies. Even as they benefit from billions of dollars in special tax breaks, oil companies have failed to invest in production. For the last two years, they have realized record profits, but instead of lowering prices for consumers or investing these funds, they have undertaken record stock buybacks, mergers, and acquisitions that benefited executives and wealthy shareholders. The Budget saves $35 billion by eliminating special tax treatment for oil and gas company investments, as well as other fossil fuel tax preferences.
Invests in Prevention and Treatment Options for HIV/AIDS, Hepatitis C, and Vaccine-Preventable Diseases to Reduce Costs. The Budget will lower Medicaid costs by over $10 billion by requiring that insurance companies pay Medicaid back when they are charging far more than they actually spend on patient care. Currently, only about half of states require private insurance companies that provide Medicaid coverage to pay money back when they realize outsize profits. Without this requirement, insurance companies are keeping millions of dollars each year in excessive payments. The Budget would apply this requirement nationwide, consistent with similar requirements in Medicare Advantage and Affordable Care Act plans. With it, insurance companies will no longer be able to charge for unnecessary administrative expenses or sacrifice quality patient care to increase their profit margins, and if they charge too much, they will have to pay it back to the Medicaid program rather than keeping the profits and, in some cases, making larger payments to shareholders.
Eliminates Tax Subsidies for Real Estate. The Budget saves $20 billion by closing the “like-kind exchange” loophole, a special tax subsidy for real estate. This loophole lets real estate investors—but not investors in any other asset—put off paying tax on profits from deals indefinitely as long as they keep investing in real estate. This amounts to an indefinite interest free loan from the government. Real estate is the only asset that gets this sweetheart deal.
Cracks Down on Bad Actors, Systemic Fraud, and Identity Theft
The Administration is committed to improving program integrity and ensuring effective stewardship of taxpayer dollars, including through implementation of the American Rescue Plan, the Bipartisan Infrastructure Law, the CHIPS and Science Act, and the Inflation Reduction Act. To deliver on those commitments, the Administration has provided agencies with the tools to strengthen program integrity and deliver results. The President has made clear that results, transparency, and accountability go hand-in-hand, which is why the Budget includes robust legislative and funding proposals that would ensure agencies and their Inspectors General have the resources and authorities they need for appropriate oversight of these programs. The Budget ensures additional resources and time for investigations and prosecution of those engaged in major or systemic pandemic fraud, invests in identity theft and fraud prevention to stop fraud before funds are ever paid out, and provides much-needed help for innocent victims recovering from having their identities and benefits stolen.
Building on that progress, the Budget includes proposals to crack down on systemic fraud and identity theft, hold bad actors accountable, and cut or recoup spending stolen by the most sophisticated criminals. Each dollar spent on enforcement and oversight saves American taxpayers exponentially more. The President’s Budget:
Cracks Down on Wealthy and Big Corporate Tax Cheats. The Inflation Reduction Act addressed long-standing Internal Revenue Service (IRS) funding deficiencies by providing stable, multi-year funding to improve tax compliance by finally cracking down on high-income individuals and corporations who too often avoided paying their lawfully owed taxes, and to improve service for the millions of Americans that do pay their taxes. Already, the IRS is using these resources to crack down on tax evasion by the wealthy and big businesses. For example, it is collecting taxes owed by tax-delinquent millionaires and addressing complex tax schemes used by the largest partnerships and multinational corporations, along with improving customer service and modernizing IT infrastructure. The Budget proposes to restore the full Inflation Reduction Act investment and provide new funding over the long-term to continue cutting the deficit by making sure that wealthy Americans and big corporations pay the taxes they owe. This investment will raise over $340 billion in additional revenue over the next decade.
Pursues, Investigates, and Punishes Systemic Fraudsters. Past underinvestment in basic government technology and the crush of demand during the pandemic, combined with decisions to take down basic fraud controls at the onset of the pandemic, led to a historic degree of outright fraud and identity theft of emergency benefits. The Budget will empower law enforcement, investigators, and watchdogs to pursue, investigate, punish, and recover money from those who were engaged in the most major or sophisticated frauds—from well-off individuals who took hundreds of thousands, if not millions, of dollars from taxpayers to sophisticated criminal syndicates engaging in systemic identity theft. It will extend the statute of limitations for serious instances of fraud in pandemic programs, and would extend the statute of limitations for the Employee Retention Tax Credit, giving the IRS the time it needs to evaluate potentially erroneous claims and crack down on bad actors. The Budget would also increase funding to triple the number of COVID-19 Fraud Strike Forces, provide historic funding to Inspectors General in agencies hit the hardest by Pandemic fraud who are saving billions already with funds provided by the Administration, and expand analytic tools to audit and investigate possible fraud. Investigators and watchdogs have already recovered or prevented billions of dollars from being stolen, enabling these programs to better serve eligible Americans.
Invests in Fraud Prevention and Stopping Identity Theft. The pandemic exposed significant vulnerabilities in our government benefits systems, especially in regard to preventing systemic identity theft as a means to steal benefits designed for Americans coping with the health and economic impacts of the pandemic. The Budget proposes significant resources to support stronger preventative steps to prevent identity theft in public benefits, including funding to establish a permanent antifraud data and analytics capability analogous to the Pandemic Response Accountability Committee’s (PRAC) Pandemic Analytics Center of Excellence, and significant investments in Inspectors General to ensure lessons learned are applied going forward.
Combats Identity Theft and Other Unemployment Insurance (UI) Fraud. Emergency unemployment benefits were a critical lifeline for millions of workers who lost jobs through no fault of their own during the pandemic. But the pandemic exposed the need for stronger fraud prevention systems and greater investment in technology to modernize unemployment systems. The Biden Administration changed the previous Administration’s policy to allow the oversight community quick access to all State information necessary to stop billions of dollars in systemic multi-state UI fraud. The Administration also secured significant funding in the American Rescue Plan to help 53 states and territories modernize and prevent future fraud and identity theft, while protecting benefits for workers who have earned them. The Budget builds on this work with new proposals for modernizing, protecting, and strengthening the UI program that will lead to over $3 billion in budgetary savings. These provisions will tackle fraud, support more robust identity verification for UI applicants, help states develop and test fraud-prevention tools and strategies, and increase investigations of fraud rings targeting the UI program. For example, these reforms would require States to use the National Directory of New Hires and prisoner datasets to check UI claims and allow States to use 5 percent of recovered fraudulent overpayments for improper payment prevention and recovery. These proposals are designed to provide states with new tools and resources to combat UI fraud and reduce and recoup fraudulent and other improper payments and contrast with congressional Republican proposals that could actually impede and distract from efforts to address systemic fraud.
Expands Penalties When Employers Violate Workers’ Rights to Organize, Receive Fair Wages, or Have a Safe and Healthy Workplace Free from Discrimination. For too long, employers have only received a slap on the wrist—at most—when they fire or retaliate against workers for exercising their right to organize and collectively bargain, steal wages from workers, force workers to work in unsafe conditions, exploit children, or otherwise flagrantly violate the Nation’s labor laws. To create meaningful deterrence for employers from violating workers’ rights, ensure those who do violate their rights are held accountable, and level the playing field for responsible employers, the Budget proposes instituting and significantly increasing penalties levied by the Department of Labor, the Equal Employment Opportunity Commission, and the National Labor Relations Board for employers that violate workplace safety and, health, wage and hour, child labor, equal opportunity, and labor organizing rules. This will deter employers from violating workers’ rights, leveling the playing field for responsible employers, and ensure those who do violate their rights are held accountable, while also increasing federal government collections.
Cuts Wasteful Spending Through the Tax Code
The Budget cuts wasteful spending through the tax code and ends tax loopholes that provide billions of dollars in unwarranted subsidies to high-income people with the ability to exploit them. The President’s Budget:
Prevents Wealthy Investment Fund Managers from Avoiding Tax on Their Earnings. The carried interest loophole allows wealthy investment managers to pay a 20 percent rate on the pay they receive for managing fund assets, instead of the current 37 percent rate that comparable wage earners pay. This loophole has allowed some investment fund managers to pay lower taxes than many American workers. The Budget would finally close this loophole, saving $7 billion.
Ends Loopholes that Let Billionaires Exploit Middle-Class Retirement Savings Incentives. Tax breaks for retirement savings are supposed to help middle-class workers put a little aside for the future. But some billionaires have used a loophole in the law to accumulate tens of millions of dollars in tax-favored retirement accounts—far in excess of what’s needed for retirement security—and never taking distributions from those accounts. The Budget limits the amount taxpayers with incomes over $400,000 can hold in tax-favored retirement accounts, along with other safeguards to prevent abuse of these accounts by some of the nation’s wealthiest individuals. These reforms will save $24 billion.
Cracks Down on Corporate Jet Loopholes. The Budget eliminates a tax break that gives preferential treatment for writing off corporate jet purchases, compared to commercial aircraft. It would also increase the fuel tax on corporate and private jet travel, so that corporate executives and other wealthy Americans pay their fair share for the use of airspace and other public services related to air travel. Together, these reforms will save $4 billion.
Eliminates Tax Subsidies for Cryptocurrency Transactions. The Budget saves $26 billion by eliminating a special tax subsidy for crypto currency and certain other transactions. Right now, crypto investors aren’t subject to the same rules of the road that investors in stocks or other securities have to follow, allowing them to report excessive losses. For example, a crypto investor—unlike an investor in stocks or bonds—can sell a cryptocurrency at a loss, take a substantial tax loss to reduce their tax burden, and then buy back that same cryptocurrency the very next day. The Budget eliminates this tax subsidy for crypto currencies by modernizing the tax code’s anti-abuse rules to apply to crypto assets just like they apply to stocks and other securities.
Ends Life Insurance-Related Tax Shelters. Insurance companies have developed abusive tax shelters that take advantage of tax benefits available for life insurance. The Budget cracks down on these tax shelters used by the very wealthy, while preserving the tax benefits for life insurance for everyday Americans. The Budget ends tax benefits for “private placement life insurance,” which is a customized investment product sold only to the very wealthy—who generally pay annual premiums at least $1 million a year, and often substantially more, for these policies—the opportunity to earn substantial tax-free or tax-deferred investment income. It would also address loopholes related to business-owned life insurance policies taken out on the business’s officers and employees and “frozen cash value” contracts that exploit weak insurance regulations in certain foreign jurisdictions to avoid U.S. income taxes. These proposals would raise $14 billion.
Saves Taxpayer Dollars by Making Programs More Cost Effective
The Budget also proposes reforms to save taxpayer dollars by making programs more efficient and effective at a lower cost to the American people. The President’s Budget:
Lower Medicaid Spending by Expanding Access to Prevention and Treatment Options for HIV/AIDs and Hepatitis C. The Budget invests in the treatment and prevention of infectious diseases, including Hepatitis C, HIV, and vaccine-preventable diseases. The Budget proposes a national program to significantly expand screening, testing, treatment, prevention, and monitoring of Hepatitis C infections in the United States, with a specific focus on populations with high infection levels. To help end the HIV epidemic, the Budget eliminates barriers to accessing PrEP for Medicaid beneficiaries and proposes a new mandatory program to guarantee PrEP at no cost for all uninsured and underinsured individuals and provide essential wrap-around services. In addition, the Budget proposes a new Vaccines for Adults program to provide uninsured adults with access to routine and outbreak vaccines at no cost. The Budget also expands the Vaccines for Children program to include all children under age 19 enrolled in CHIP and covers the vaccine administration fee for all VFC-eligible uninsured children.
Extends Spectrum Auctions. The Budget proposes to extend authority for the Federal Communications Commission to auction radio spectrum, which is an important national resource needed for a wide variety of uses including high-speed Internet, satellite communications, radio broadcasting, national security, and public safety. Managing diverse and sometimes competing demands requires planning and coordination. Ensuring the government can make efficient use of this valuable and finite resource will generate over $54 billion in savings.
Eliminate Duplicative or Inefficient Programs. The Budget proposes to eliminate programs that provide inefficient reimbursements or operate less effectively than programs with similar missions, including the State Criminal Alien Assistance Program.
Consolidations to Increase Program Efficiency. The Budget streamlines programs to be more effective, including a proposal that will increase funding for the flagship Community Development Financial Institution assistance program by eliminating duplicative program-specific funding requirements.
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