Biden has big plans for junk fees, a billionaire’s tax and paid leave. But can he actually enact them?
President Joe Biden is pursuing an aggressive economic agenda aimed at boosting worker power, taxing the rich, reducing fees and taking on dominant corporations.
But with Republicans in control of the House — and eager to block the president’s wishlist — Biden doesn’t have a pathway to enact many of the economic reforms announced at his State of the Union address, including a four percent tax on stock buybacks, a wealth tax on billionaires and expanded paid leave for workers.
That’s why the Biden administration is shifting its focus to regulations in an effort to secure economic wins without the help of Congress. Its recent proposals include a ban on all non-compete agreements and a high-profile campaign against so-called “junk fees.”
Here’s how likely it is that any of these proposals become law anytime soon.
What are ‘junk fees’?
The Consumer Financial Protection Bureau (CFPB), under the direction of Biden appointee Rohit Chopra, unveiled a proposed rule last week to cap credit card late fees at $8, which would save American consumers $9 billion annually, according to an agency estimate.
It’s the latest effort by federal agencies to take on surprise fees that the administration sees as deceptive and unnecessary. The Department of Transportation has proposed a rule to require airlines to show all extra fees upfront, while the Federal Trade Commission is working on its own rule aimed at blocking surprise fees for customers purchasing concert tickets or booking a hotel room.
Consumers have expressed frustration over fees charged by powerful companies like Ticketmaster, noting that they don’t have a choice if they don’t want to pay the fee and it typically isn’t shown upfront.
“Look, junk fees may not matter to the very wealthy, but they matter to most other folks in homes like the one I grew up in, like many of you did,” Biden told Congress on Tuesday. “I know how unfair it feels when a company overcharges you and gets away with it. Not anymore.”
Will junk fee regulations survive lawsuits?
The Biden administration will need to stave off legal challenges from business groups that represent some of the largest U.S. companies, which are preparing to counter the regulatory-centric strategy.
“We definitely anticipate some of the policymaking energy, at least from Democrats, to be more focused on the regulatory front, given it’s more difficult if not impossible at this point for them to pass major legislation through Congress,” said Bill Hulse, vice president at the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness.
The Chamber, the nation’s largest corporate lobbying group, is “taking a very deep look” at challenging the credit card rule, Hulse said. He pointed to questions about whether the CFPB followed various legal obligations, such as examining the rule’s impact on small banks and credit unions or consulting with federal banking regulators.
Anne Balcer, senior executive vice president of government relations at the Independent Community Bankers of America, said that her group will “consider all options to ensure our nation’s community banks are not disproportionately impacted by this proposed rule and are able to offer a full suite of products and services to small businesses and consumers.”
What law might target junk fees?
During his address, Biden called on Congress to pass the Junk Fee Prevention Act, which would codify many of the administration’s regulatory efforts, protecting them from legal action.
But Republicans have pushed back on the proposals, arguing that the federal government shouldn’t dictate the business model of private companies.
“Any attempts by the CFPB or other financial regulators to stifle financial inclusion or consumer choice or undermine the safety and soundness of particular financial institutions or the financial system as a whole would be imprudent,” House Republicans wrote in an October letter to the CFPB opposing restrictions on bank overdraft and other fees.
What is a non-compete agreement and why does it matter to workers?
Biden’s FTC last month released a proposal to ban non-compete agreements, which aim to prevent workers from moving to a similar job in the same field or part of the country.
Those agreements, which impact at least 30 million Americans, often limit employees’ ability to get a raise or start their own business. The FTC estimates that the clauses cost workers nearly $300 billion in wages each year.
Virginia-based veterinarian Lori Rios wrote in a comment to the FTC that a non-compete agreement forced her to work at a poorly-managed practice for five years. She was only able to escape the clause by moving 120 miles away and seeing her family only on the weekends for three years.
“This proposal would revolutionize my life and the life of so many bound employees. I sincerely hope this is not another proposal from the government that ends up going nowhere or takes decades to finally come to fruition. Many of us cannot afford to give away decades more of our work life,” Rios wrote.
The U.S. Chamber and other business groups are exploring legal action to defeat the rule, along with legislation in Congress to block its implementation. Employers are particularly concerned that the rule would upend existing agreements. Companies worry that it would lead to the transfer of trade secrets to their competitors.
Can the billionaire’s tax pass Congress?
Biden’s billionaire’s tax proposal, first unveiled last year, would enact a minimum 20 percent tax on households with a net worth of $100 million or more. The White House argues that billionaires pay less in taxes than most working families, as most of their wealth is in investments that are taxed at a lower rate.
“No billionaire should be paying a lower tax rate than a school teacher or a firefighter,” Biden said Tuesday.
The tax would need to go through Congress, and Speaker Kevin McCarthy (R-Calif.) has promised that spending bills will not include any tax hikes. Meanwhile, a billionaire’s tax was supposed to be part of the Inflation Reduction Act, but Sen. Joe Manchin (D-W.Va.) opposed it, arguing that the federal government shouldn’t tax unrealized gains.
Can Biden quadruple the stock buyback tax?
Democrats’ Inflation Reduction Act enacted a 1 percent tax on stock buybacks, which is when publicly traded companies repurchase their own shares from investors to boost their stock price and attract investors.
Democrats have criticized buybacks, arguing that companies should reinvest extra money into better pay and benefits for workers and stronger infrastructure. Many Democrats hoped that the 1 percent tax would discourage companies from repurchasing their shares, but Meta, which owns Facebook and Instagram, and oil giant Chevron recently announced $40 billion and $75 billion in buybacks, respectively.
Biden called for quadrupling the tax, which would likely push companies away from the tactic, or at the very least bring in more revenue for the federal government.
Still, Biden’s proposal also stands no chance in a divided Congress. Republicans attacked the 1 percent tax, arguing that it would impact stock prices and hurt retirement accounts.
Can Biden extend paid leave for employees?
Only 25 percent of U.S. workers receive paid family leave and 41 percent get paid medical leave through their employer, according to Labor Department data.
The U.S. is the only developed country that doesn’t mandate paid leave for new parents.
Biden has called on Congress to expand paid leave, arguing that it would help alleviate the shortage of workers by enabling “millions of more people to go and stay at work.”
While lawmakers have discussed bipartisan paid leave legislation, ideological differences make for a difficult road ahead. Republicans want to provide tax credits to businesses that provide paid leave, while Democrats prefer a taxpayer-funded program. Both proposals would add to the deficit at a time when the GOP is trying to cut spending.
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