Biden’s tax plans are sizable but not radical
ATLANTA — President Donald Trump describes Democratic challenger Joe Biden as a “tool” of “radical socialists” who are bent on taxing every American business and household into bankruptcy. Some progressives say Biden is a corporate crony who will never address systemic inequalities in U.S. society.
In reality, Biden has taken a relatively consistent approach over five decades in politics and during his latest White House bid. The former senator and vice president backs an active federal government that he says should support but not constrict private enterprise, and he believes the highest federal tax burden should fall on the wealthiest.
“Go out and make a million bucks,” Biden would sometimes tell deep-pocketed donors during his early campaign fundraisers. “Just pay your fair share” back into the system.
A look at his tax plans:
Key number: $400,000 of taxable income
Biden says no individual with taxable income of $400,000 or less would see a federal tax increase under his plans, at least directly. Less than 2% of U.S. households report that level of income. There are several policy provisions tied up in Biden’s promise, but income tax rates often get the most attention.
There are currently seven rates (10% to 37%) applied to varying income brackets. Biden’s plan would raise only the top rate, pushing it to 39.6%, what it was before the Republicans’ 2017 overhaul. That rate kicks in for income beyond $510,000 or so, and more for married couples filing jointly. Separately, Biden proposes capping certain itemized deductions for higher earners. Those changes could mean variable tax increases for individuals down to that $400,000 income threshold — more for married joint filers.
The nonpartisan Committee for a Responsible Budget figures that companies would pass along some of the burden of Biden’s higher corporate taxes to consumers, imposing cost increases ranging from 0.2% to 0.6% on most households at lower income thresholds.
Rethinking Social Security and investment taxes
The most obvious philosophical changes in Biden’s plan come on payroll and investment taxes, significant slices of individuals’ tax burdens beyond income tax.
The existing 12.4% payroll tax, which is split between employers and workers and finances the Social Security program, applies only to the first $137,700 of a person’s income. That cap goes up annually with inflation. But it means high-earning professions — top salaried lawyers, physicians, business executives, for example — don’t pay Social Security taxes on wages beyond the threshold.
Biden proposes instituting the tax again beginning at $400,001 of income. The untaxed gap between the cap and $400,001 would close over time with the annual inflationary increases. That would eventually mean a Social Security system where all wage earners, regardless of their income and profession, paid the full freight of payroll taxes.
Biden applies a similar philosophy to investment income. Generally, current law taxes gains on long-term investments — those held for more than a year — and certain dividend income at capital gains rates that top out at 20%. That’s lower than the marginal income tax rates for many in the investor class.
Gains on short-term holdings of less than a year are subject to personal income tax rates. Biden proposes extending that principle to all investment gains for any income beyond $1 million, a change that could significantly affect the wealthiest investor class. Think of billionaire investor Warren Buffett and his lament that current law essentially leaves his secretary with a higher effective federal tax rate than he has.
Business taxes and the “Amazon” rule
Biden offers a slew of business and banking tax law changes, but with three headliner proposals. He wants a 28% percent corporate tax rate. That’s higher than the current 21% but lower than the 35% rate before the 2017 overhaul. President Barack Obama had pushed for a 28% rate, but Republicans in Congress refused to negotiate.
Separately, Biden wants a 15% minimum tax on “book profits”