How does Biden want to change tax brackets? Who would pay more and less?
The new infrastructure package being discussed in the White House could be paid for with a spate of changes that reverse the Trump administration's tax cuts.
Having already passed a first burst of federal funding to tackle the pandemic and its effects on the economy, President Biden is reportedly working on a new tax programme that he hopes will address the widening wealth disparity in the United States.
Biden is intent on using stimulus spending to reboot the flailing American economy and has repeatedly stated that he intends to pay for it by raising taxes on the wealthiest.
Throughout his successful election campaign Biden promised that he would not raise taxes for anyone earning less than $400,000 per year, but will he keep that promise?
Biden looks to reverse Trump tax cuts
In a press conference earlier this month, White House press secretary Jen Psaki said: “The President remains committed to his pledge from the campaign that nobody making under $400,000 a year will have their taxes increased.”
As suggested, Biden looks set to increase the income tax threshold for high-earners but there is not yet any clear indication of where that threshold might be. Interestingly Psaki has clarified the $400,000 threshold and said that the figure applies to families, rather than individuals, meaning that a married couple who each earn $250,000 per year could have their taxes raised.
If he decides to stick to the rest of his campaign tax promises then there will indeed be some significant changes, with the wealthiest Americans and big businesses set to shoulder the burden. While campaigning Biden proposed increasing the corporate tax rate from 21% to 28%; halving the huge tax cuts (from 35% to 21%) introduced by former President Trump.
What are the chances of Biden passing these tax rises?
Tax raises are always a tricky legislative task but, after garnering strong approval ratings for the American Rescue Plan, polling suggests that there is broad support for the new tax proposals. The New York Times found that most Americans, and even many Republicans, would be in favour of upping the tax rate for large corporations and high-income individuals.
There is also the fact that Biden has set out some widely popular but hugely expensive plans to help reboot the American economy. Central among them is a massive bout of infrastructure spending that is expected to cost upwards of $3 trillion.
Given that the recent stimulus bill garnered no GOP support in Congress it is fair to assume the same of any proposals increasing taxes, but the signs from within Biden’s own Party are positive.
The most centrist of the Democratic Senators, Joe Manchin of West Virginia, told reporters earlier this week that the new infrastructure plan was “going to be enormous” and that its costs would need to be covered. He also implied a willingness to make changes to the 2017 tax cuts and said that he hoped any rises would be “weighted in one direction to the upper end.”