What's the Biden tax plan? Who will pay more and who less?
Corporations and the wealthiest look set to have a higher tax bill under Biden’s plan reversing his predecessor's tax policy which gave them huge breaks.
As former President Trump gave his farewell on Joe Biden’s inauguration day he said “I hope they don't raise your taxes. But if they do, I told you so.” With the government under Democratic unified control there is a good chance they will.
President Biden has proposed major spending programs to pull the US out of the current economic crisis induced by the coronavirus pandemic. He also wants to make large investments in infrastructure and fighting climate change to build back America creating millions of new jobs. All of this will cost money, part of which his administration expects to get through higher taxation on the wealthiest and corporations, who have been benefiting from the tax cuts Trump pushed through in 2017.
Details of Biden’s tax plan
During his campaign for the presidency Biden outlined his vision for tax policy that departed significantly from the ones enacted during the Trump presidency. Moody’s Analytics calculates that Biden’s plan would result in $1.4trn of extra taxation in the three years to 2024.
The wealthiest will see tax increases
The Biden plan would increase tax rates for individuals whose incomes are $400,000 and higher. Under his plan he would repeal the tax-cut to the top income-tax rates, they would see their income-tax rate return to 39.6 percent. Biden’s team signaled that capital gains would be taxed at the same rate as income, opposed to the maximum of 23.8 percent, for households earning over $1 million. Additionally he would subject more of their earnings to Social Security taxes along with increasing taxes on inherited wealth and reduce some of the exemptions in estate and gift tax opened up by Trump.
Corporations encouraged to stay in the US
Biden’s plan would also raise the rate for corporations to 28 percent from the current 17 percent, previously it had been 35 percent. His plan also envisioned a new “minimum book tax” of 15 percent on firms with $100 million or more in net income that pay little to no federal income tax. His team proposed a tougher tax regime on corporations that offshore jobs. As well it would discourage companies from moving their profits abroad to get around US corporate tax.
Taxes on the middle and low earners
Low- and middle-income families were given Biden’s word that their taxes would not go up. Individuals that earn under $400,000 represent roughly 98 percent of taxpayers. For households on the lower end of the income his plan included policies like increased income tax credit and expanded tax credits for children. The average American household could actually see their tax burden reduced and be better off.
Will Biden’s tax plan get through?
Some of the proposals are included in President Biden’s American Rescue Plan such as the tax credits. Those will help the average American household in the present. The increase in the corporate tax rate and for wealthier individuals will have to go through the Congress. The Democrats are willing to use reconciliation to get their proposals through if negotiations with the Republicans drag out. Like with Trump’s tax plan, they could use this to get Biden’s plan through along partisan lines avoiding a filibuster.
In the months ahead Biden and the Democrats are planning to move a lot of legislation through the Congress, what the final product will look like will been seen some time down the road.