Unless you make over $400,000 per year, Biden’s tax plan will not hurt you in spite of Republican distortions.
“Nobody making under 400,000 bucks would have their taxes raised, period, bingo.”— Biden, interview on CNBC’s “Squawk Box,” May 22
Biden has pledged to reverse much of Trump’s tax cuts for the wealthy and corporations to fund, in part, ambitious climate, education and health-care plans. But, no new taxes for anyone making less than $400,000.
Biden’s key proposals:
- Restore the top individual tax rate from 37 to 39.6 percent
- Raise the corporate tax rate from 21 to 28 percent
- Set minimum corporate taxes for domestic and foreign income
- Boost the tax on capital gains by labeling it as ordinary income
- Reintroduce limits on itemized deductions.
- Make wages above $400,000 subject to the 12.4 percent Social Security payroll tax, which is split between employees and employers.
- (Currently, everyone stops paying the Social Security payroll tax once wages reach $137,700, a level that increases each year with inflation. In effect, there would be a gap between about $140,000 and $400,000 in which people would stop paying the payroll tax.)
Biden has also offered a variety of tax credits:
- A first-time home buyer’s tax credit
- A refundable renter’s credit
- A tax credit for informal caregivers
- A significant increase in the child-care and dependent-care tax credit.
(He also supports reinstating the individual mandate if people fail to purchase health insurance, but whether that is a tax or just a fine, as the Health and Human Services Department defines it, is open to debate.)
Five independent tax analyses agree that the increased revenue would be gathered from the very wealthy or from corporations, with about half of the money coming from the top 0.1 percent and three-quarters from the top 1 percent of households.
At this point, you might ask: If Biden supposedly isn’t raising taxes on people making less than $400,000, how can Republicans claim that someone making less than $50,000 a year will end up with a tax increase? Biden’s proposed corporate tax increase is the reason. They assume corporations adjust to a higher tax by reducing investment returns or cutting workers’ wages.
But that assumption is suspicious. When Trump cut the corporate income tax rate, the assumption worked in his favor because the models assumed corporations would raise workers’ wages and thus after-tax income — something that does not yet appear to have occurred. By reversing some of Trump’s tax cut for corporations, Biden gets dinged by the same tax models even though they don’t appear to have accurately predicted the impact of Trump’s tax cuts.
Biden’s economic advisers point out that the models often do not take into account the impact of a variety of tax credits Biden has proposed — or spending programs aimed at the bottom half of the income spectrum — which would mitigate the very theoretical impact of the corporate tax increase.
“This isn’t about whether middle-class people will have to pay more taxes. Clearly, they won’t. This is an argument about whether making corporations pay more income taxes would trickle down into lower workers’ wages. Anyone who believes that there would be significant trickle-down needs to explain why the massive corporate rate cut in 2017 was almost entirely kept by shareholders and why child-care credits, health-care credits, or other items in the Biden plan wouldn’t generate the similar secondary benefits to workers.”Austan D. Goolsbee, chairman of the Council of Economic Advisers under Barack Obama
In other words, Republicans are peddling the same “give-to-the-wealthy and it will trickle down” malarkey that they have been pushing since 1980.
Economist Gene Sperling said the impact of the Biden tax plan should be measured on how it affects individuals when they have to calculate their taxes.
“Even if you buy the very questionable idea that a corporate tax increase would negatively impact lower- and middle-income workers, it is just not correct to look at that as a tax increase. Consider people filling out their 1040 — or any tax form. There will not be even one taxpayer making less than $400,000 who at the end of doing their taxes will be able to say, ‘I am now facing higher taxes,’ while millions and millions will be able to say they are paying less.”Gene Sperling, Director of the National Economic Council and Assistant to the President for Economic Policy under Presidents Bill Clinton and Barack Obama,
“I am unaware of any provision in the updated Biden proposal that would raise taxes on individual taxpayers making less than $400,000. I would add that suggestions that the Biden plan amounts to a massive increase in taxes on the middle class are a total misrepresentation of our findings and the findings of other think tanks.”Eric Toder, co-director of the Tax Policy Center,
Read more at: Joe Biden’s claim that he won’t raise taxes on people making less than $400,000, Washington Post, August 31, 2020