Biden calls on US rich to pay their 'fair share'

President Joe Biden called on US companies and the country's richest people to pay their "fair share" as he set out a plan to reset decades of aversion to taxes and government spending.

In his first address to Congress, Biden proposed a $1.8tn programme to boost education and provide financial support for middle- and low-income families. The president also reiterated his plans for $2.3tn of infrastructure spending on top of $1.9tn of Covid-19 measures passed in March.

Biden wants to pay for his plans with higher corporation tax and by increasing the top marginal rate of tax for the wealthiest Americans to 39.6% from 37%. He has also proposed a near-doubling of capital gains tax for Americans who earn more than $1m a year.

"It's time for corporate America and the wealthiest 1% of Americans to pay their fair share - just pay their fair share," Biden told lawmakers.

The 78-year-old president's proposals seek to reverse the direction of US fiscal policy set by Ronald Reagan in the 1980s. This orthodoxy, more or less observed by Republicans and Democrats, held that low tax and limited government intervention were the keys to unlocking wealth that would benefit the wider population.

But studies have shown that the incomes of most Americans have stagnated or declined in the past four decades while the wealth of those at the top has soared. This has created a new "gilded age" instead of dispersing the benefits of growth, critics say.

On the eve of his 100th day in office Biden said the best way to grow the economy was to open opportunities for ordinary families instead of making financiers richer.

"Wall Street didn't build this country," he said. "Trickle-down economics has never worked. It's time to grow the economy from the bottom up and the middle out."

Biden said the US economy was "ready for take-off" supported by his fiscal measures and a successful vaccination programme. He contrasted this scenario with the situation left behind by his predecessor, Donald Trump.

"We are working again … We have shown each other and the world there is no quit in America," Biden said. "100 days ago America's house was on fire."

Biden linked his spending plans to foreign policy, which he has set on a more internationalist course after Trump shunned cooperation with allies. He said talks with China's president Xi Jinping had convinced him action was needed to maintain the US's dominant economic position.

"China and other countries are closing in fast," he said. "He [Xi] is deadly earnest about becoming the most significant, consequential nation in the world. He and others, autocrats, think that democracy can’t compete in the 21st century with autocracies. It takes too long to get consensus."

Biden, a Democrat, urged Republicans to work with him. The Democrats control both houses of Congress but with thin majorities that could disappear at the 2022 midterm elections.

Tim Scott, a Republican senator from North Carolina, dismissed Biden's proposals in his response for the Republicans. He also accused Democrats of failing to work for consensus.

"Democrats want a partisan wish-list," Scott said. They won't even build bridges … to build bridges."

Some Democratic senators are also unhappy about the size of Biden's spending plans but polls show that his programmes are popular with the US public. Some critics have said the proposals, combined with ultralow US interest rates, could lead to inflation taking off.

Richard McGuire, head of rates strategy at Rabobank, said: "There remains a sizeable question mark over the Democrats’ ability to push through these stimulus plans owing to the need to co-opt the centrists within their party due to the slimmest of majorities that the party holds in the Senate. The gap between the drawing board and agreed outcome could be somewhat large."