Sunday, October 17

Here’s how Biden plans to raise taxes on the wealthy and business

(CNN) — Now that you have signed the $ 1.9 trillion covid-19 aid package proposed by the Democrats, the President of the United States, Joe Biden, moves on to the next items on your legislative agenda, and lays the groundwork for raising taxes on the wealthiest Americans.

He is expected to present the next step in his economic program during a joint session before Congress on April 28.

Biden reaffirmed the promises he made as a candidate, saying that those who earn more than $ 400,000 “will see a tax increase that goes from small to significant.”

However, he promised that those below that threshold “will not see a single penny of additional federal taxes,” and is already working to make several come true. important tax breaks, albeit temporarily, for the low-income and middle-class Americans who were part of the stimulus. These include the expansion of the tax reduction for children and the earned income tax reduction, as well as more generous subsidies to the premiums of the Affordable Care Act.

(The impact on those earning less than $ 400,000 will be discussed later.)

Much of Biden’s plan is based on reversing the 2017 tax cuts made by Republicans, who leaned more toward those at the higher end of the income ladder, although many key provisions will expire after 2025.

In March, White House press secretary Jen Psaki said that Biden believes that “those above are not doing their part“And” obviously that companies could be paying higher taxes. “

Biden has not submitted a formal tax proposal since taking office, though he is expected to soon unveil measures that will help fund his infrastructure plans, clean energy and other revival efforts.

During his run for the White House last year, he unveiled a plan that would increase federal revenue by $ 2.1 trillion over a decade, according to a nonpartisan analysis by the Center for Fiscal Policy released in November.

Although his proposal is likely to be amended by Congress, it is expected to have good acceptance in the Democratic-controlled Capitol. More progressive lawmakers like Senators Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont are pushing back the controversial wealth tax they proposed in their recent Democratic primary presidential campaigns.

This is what Biden proposed in campaign:

Increase the income tax rate

Biden called for the marginal rate to be returned to 39.6%, noting that that was the rate when Republican President George W. Bush was in office. The 2017 tax cut lowered that rate to 37%.

Multiple sources familiar with the ongoing discussions confirmed to CNN that the plan calls for raising the marginal income tax rate to 39.6% for households with incomes of $ 400,000 or more.

White House officials have stressed that the details of the plan have not been finalized and could change before the announcement. Biden continues to meet with political advisers to finalize details.

Biden said in a March interview with ABC News that this increase would raise $ 230 billion, roughly twice the estimate from the Center for Fiscal Policy to raise the rate for those earning about $ 400,000 a year. This measure would target some people whose top rate is currently 35% and all those in the 37% bracket, said Howard Gleckman, the center’s principal investigator.

His proposal would also introduce two changes that would limit the value of taxpayer deductions above that income threshold, generating another $ 275 billion or so, according to the center.

The top 1% of earners, for example, are estimated to see an average 15.6% reduction in their after-tax income in 2022, according to the center.

Raise taxes on capital gains

Those who earn more than $ 1,000,000 a year would have to pay more taxes on capital gains, which typically make up the bulk of income for the wealthy, according to Biden’s campaign proposal.

The long-term capital gains of these taxpayers would be subject to the maximum wage and salary rate, which is currently 37%, but which would rise to 39.6% under their expanded plan.

This would tax those gains as ordinary income, nearly doubling the rate at which they are currently taxed and blurring the distinction with short-term capital gains, which are already taxed as ordinary income for investments held for less than a year. Sources familiar with the debate confirmed that this provision is still in the plan.

The ability to tax capital gains at the same rate as income has been a long battle on Capitol Hill, with many Democrats in favor.

Currently, investments that are held for at least one year are subject to a maximum rate of 20%. People earning $ 200,000 a year and married couples earning $ 250,000 a year pay a 3.8% additional tax on your capital gains to help fund the Affordable Care Act.

Tax untaxed capital gains at the time of death

Today, the heirs of wealthy Americans enjoy a significant tax break. Assets that pass directly to them receive an “increase” in their cost basis, which means that they are valued from the date of death. This can minimize the tax burden on the heirs when they sell the assets. And it means that the earnings accumulated during the life of the deceased parent are never taxed.

Biden would require estates to pay taxes on the untaxed gains on these assets.

This measure, along with the increase in the tax on capital gains, would raise US $ 370,000 million in 10 years, according to the Center for Fiscal Policy.

Raise taxes on the payroll of the rich

As part of his campaign platform, Biden wanted to subject salaries of more than $ 400,000 to Social Security payroll tax, which is currently capped at $ 142,800 by 2021.

Workers and their companies each pay 6.2% of wages to finance Social Security. Biden’s provision would create a “donut hole,” in which income below the limit and above the new threshold would be subject to payroll tax.

This would raise US $ 740 billion in a decade.

Boost federal wealth tax

Biden would return the estate tax policy to how it was in 2009, when the federal exemption was $ 3.5 million per person and the rate was 45%.

Previous changes to the tax law had raised the exemption to $ 5.5 million and lowered the rate to 40% in 2017. Republican tax cuts greatly increased the exemption, which is now $ 11.7 million per person by 2021, and they maintained the 40% rate.

Changes to the wealth tax would bring in additional revenue of $ 218 billion, according to the Center for Fiscal Policy.

Raise business taxes

Biden would reverse some of the 2017 tax cuts to the corporate tax rate. It would raise it to 28%, from 21% today, but not as high as the 35% top rate that existed before the Republican tax breaks.

His campaign proposal also called for imposing a more aggressive minimum tax on multinational companies and taxing the accounting income declared to shareholders, not the income declared to the Tax Agency, among other measures.

These corporate tax increases are the largest component of Biden’s campaign proposal, raising about $ 1.3 trillion in a decade.

This is the impact on those who earn less than US $ 400,000

During the interview with ABC News, Biden reiterated his promise not to raise taxes on those who earn less than $ 400,000 a year, a claim he made repeatedly during his campaign. That includes about 90% of taxpayers.

An analysis of Biden’s campaign proposals by the Center for Fiscal Policy, as well as models from the Committee for a Responsible Federal Budget and the Penn Wharton Budget Model, have shown this to be true. They show that families making less than $ 400,000 a year will not see a direct increase in federal taxes.

In fact, middle-income households could see an average tax cut of $ 680 and low-income households could see their tax bills fall by $ 760 by 2022, the Center found.

But the story is a bit different when you consider indirect taxes, like the business tax increase Biden is proposing. Economists assume that workers end up assuming part of the cost of these taxes. They won’t see a higher income tax rate, but their after-tax wages could be lower.

CNN’s Jason Hoffman, Kaitlan Collins, Jeff Zeleny, and Jeanne Sahadi contributed to this article.

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