The nonpartisan Tax Policy Center recently released an analysis which reports that 60% of American households will face tax increases should President Joe Biden’s spending proposals become reality.
Senior fellow at the Tax Policy Center, Howard Gleckman, explains that upon scrutiny of Biden’s promise that taxes wouldn’t be raised on households making less than $400,000, the situation is “mostly [true], but not entirely.” He said that an estimated 75% of middle-income households will face increased tax burdens as a result of the tax hike on corporations.
Biden promised during his 2020 campaign that he wouldn’t raise taxes on American households making less than $400,000 per year, but the analysis reveals that a majority would have to burden some amount of tax increase as a result of his proposals. Approximately three-quarters of those households bringing in $75,000-100,000 can expect a tax increase of $440, while 69% of households making $100,000-200,000 would see an $830 increased burden on average.
The increased tax rates continues to rise with a household’s income, with those making $200,000-500,000 averaging an increase of $2,040, households earning $500,000-1 million would see an increase of $8,810, and earners who bring in an excess of $1 million would have a tax rate increase of $265,939.
Additionally as part of Biden’s proposed tax hikes, the corporate tax rate would jump from 21% to 28%, harming businesses in a recovering post-pandemic economic climate. The president has also made calls for drastically increasing the nation’s capitol gains rate from 21% to 39.6%. Additionally, he is seeking to set the nation’s top rate at 39.6% up from 37%.
Biden’s budget proposals would place the top rate tax on individuals earning over $452,700, and married couples earning over $509,300 would also be subjected to the top rate. Heads of households earning over $481,000 would also be subjected to the top rate, and the rate would also be applied to married people filing separately if they make over $254,650.
Biden’s tax plan does not directly call for tax hikes on those earning less than $400,000, however the analysis revealed that a majority of low and middle income households will be negatively impacted through indirect means because of lowered investment earnings and compensation related to the corporate tax increase.
Biden’s plan hopes to account for those losses to lowest income households by expanding tax credits, such as his proposed expansion of child tax credits. Assuming a middle income household had sufficient dependents, the average would see a tax savings of $540.
Biden’s tax proposal is intended to pay for his massive new spending initiatives on green energy, childcare, education, and paid family leave. The plan calls for over $1 trillion in increased spending and $800 billion in tax credits for the middle class. The Biden administration has labeled the plan as a “once-in-a-generation-investment.”
Author: Vicki Webb