An independent analysis of Democratic presidential candidate Joe Biden’s tax plan has been released, and it contains good news for anyone earning less than $400,000 a year.
Penn Wharton’s new budget model takes into account income and payroll taxes, as well as business entitlements. According to this nonpartisan report, Biden’s plan would do very little to tinker with tax rates for households earning less than $400,000 a year. However, while direct tax rates for middle income earners would be essentially unchanged, these taxpayers would see a slight increase in effective tax rates due to the indirect influence of higher corporate tax rates in the Biden plan. For example, the researchers calculated that the effective tax rate for the middle 20% of earners would rise from the current 16.9% to 17.3% due to the indirect effects of higher corporate taxes.
In addition to affluent corporations paying more under Biden’s tax policy, the extremely wealthy would also face a tax hike, with the top marginal tax rate rising to 39.6% (which is what was before Donald Trump’s 2017 tax giveaway for corporations and the wealthy). ). Biden’s tax plan would also tax capital gains at the same rate as regular income for high earners (a capital gain is the income you make when you sell something like a stock for more than the price you paid it for). you got), and would impose an additional payroll tax on income over $400,000 (currently, payroll taxes are only due on the first $137,700 of a person’s annual income). Factoring in income, payroll and corporate taxes, according to Biden’s tax proposals, the top 0.1% of earners, who earn about $3.3 million or more each year , would still need 43% of their relatively modest income to cover their tax liabilities, compared to the headline tax rate of about 30.6% for this extremely wealthy group of people under Trump’s existing tax framework.
According to Penn Wharton’s budget model, the $3.4 trillion that Biden’s tax plan would raise over the next decade would not directly cover the $5.4 trillion price tag of his spending proposals. However, the macroeconomic effects of its programs – including educational initiatives like universal pre-kindergarten, two years of debt-free post-secondary education for all students, and full tuition at public colleges for students from families earning less than $125,000as well as infrastructure spending for public transit, water infrastructure, high-speed rail, and clean energy research — would reduce federal debt by 6.1% by 2050 from current tax and spending policy under Trump.
Talking about capital gains tax and the macroeconomic effects of infrastructure spending might not do much to move the average American, if you put it that way. But taxing the wealthy to fund government services and reduce the national debt is hugely popular, and Biden’s tax policy is more or less what it does.
According to a recent survey conducted by Harris Poll and Yahoo Finance, about 75% of Americans strongly or somewhat support raising taxes if the money is used to fund government services. More than two-thirds of respondents favored raising taxes even if the money is only used to pay down the national debt. Biden’s tax plan would do both: fund more and better government services and, relative to Trump’s plan (or lack thereof), reduce the national debt.
Trump’s reckless spending has been disastrous for the national debt, yet, we have nothing to show for it. We haven’t had better schools, we haven’t been able to rebuild our crumbling roads and bridges, we certainly haven’t had a cogent national response to the pandemic. The rich got a tax cut they didn’t need and corporations had to do a bunch of stock buybacks.
Biden’s tax plan offers something different. Rather than handouts to people earning more than $400,000 a year, Biden wants to fund the things that could actually make America great again: an educated workforce prepared for 21st century jobs, infrastructure transportation that might once again be the envy of developed economies, perhaps even the international leadership role on environmental issues that has disintegrated under Trump. The ultimate difference, however, is quite simple: Donald Trump wants tax cuts for millionaires at everybody else’s expense, and Joe Biden is not doing it.
Jonathan Wolf is a litigation partner at a mid-sized, full-service firm in Minnesota. He also teaches as an adjunct professor of writing at the Mitchell Hamline School of Law, has written for a wide variety of publications, and does both his job and his pleasure of being financially and scientifically literate. Any opinions he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization he is affiliated with. He wouldn’t want to share the credit anyway. He can be reached at [email protected].