Many of the critics of President Biden’s tax plan focus on changes to the top rates, but they neglect the massive tax benefit for wealthy households under the plan. The Biden plan would allow them to defer tax payments on the rising value of their assets. As a ProPublica report illustrates, the benefits of deferring tax payments for the rich are substantial. But there are plenty of downsides to the plan. Here are some.
Biden administration’s tax plan
The Biden administration’s latest tax plan would impose a five-percent surcharge on incomes over $10 million and a three-percent surcharge on incomes over $25 million. While these measures would raise billions of dollars from the wealthiest 0.002 percent of Americans, they do less to address the problem of concentrated wealth inequality than Wyden’s “billionaire tax” which would have targeted the richest 700 Americans.
One of the biggest changes in the Biden administration’s tax plan is a proposed increase in the top individual tax rate to 39.6%. The top rate would apply to incomes of over $452,700 for individuals and $509,300 for married taxpayers filing jointly. In addition, the proposed increases to the top rates would take effect for taxable years beginning after December 31, 2022. For those making over $200 million, the proposed tax rate will be reduced over several years.
In addition to raising taxes for the rich, the Biden plan will also lower the threshold for qualified small employer health reimbursement arrangements and affordable insurance. Moreover, this plan would limit the maximum amount an employee can contribute to a health insurance plan to 8.5% of their household income. The changes will require compromise to get through the political process. Regardless of the outcome of the Georgia runoff election, the Biden administration’s tax plan is unlikely to become law before the 2020 presidential election.
White House proposal
The White House tax plan proposal would change the current system to benefit middle-class families. The current system penalizes the middle class and has too many loopholes for the wealthy. It would increase the standard deduction for middle-class families and end the loophole for corporate inversions. The tax plan would also simplify taxes for small businesses. This tax reform plan would not add a dime to the deficit, and it would provide transition revenues to invest in infrastructure and reduce the deficit.
The White House is also bringing back the idea of a minimum corporate tax rate. This tax would apply to all corporations, even those that have no taxable income. The tax is designed to address the issue of tax avoidance among companies with little or no taxable income, a complaint of Senator Biden. Meanwhile, the tax plan also proposes a new tax on the richest Americans, modeled after the proposal from Sen. Ron Wyden. The new tax would tax stock gains of people with over $1 billion in assets and only a few thousand Americans. In addition, the Democrats will almost certainly include provisions to strengthen the Internal Revenue Service.
This tax plan also proposes a minimum tax for America’s wealthiest households. The proposal would impose a 20 percent tax on households worth more than $100 million, raising $360 billion over the next decade. By making the richest Americans pay the same taxes as teachers and firefighters, the new tax proposal would help reduce the deficit. But the proposals are controversial, as many members of Congress are opposed to them. The plan is still in the early stages of consideration, but it has the potential to help American families.
CBO’s proposal
The Congressional Budget Office (CBO) has released its latest estimate of the potential costs of the Trump tax plan. The plan aims to reduce the deficit by cutting vital programs like Medicare and Social Security. The CBO’s projections show that spending on health care and social security will continue to rise. But the Republicans’ tax plan proposal cuts those programs to save money. That’s a very questionable policy choice.
Swagel, a conservative economist, served as the assistant secretary of treasury for economic policy under George W. Bush in the years leading up to the global financial crisis. Swagel was confirmed to lead the CBO in June 2019. The nomination came from conservative lawmakers like Sen. Mike Enzi and House Budget Committee Chair John Yarmuth. It was then sent to Speaker Nancy Pelosi, who will vote on it shortly.
The President’s budget request would also increase IRS funding. Among the other changes proposed by the CBO are expanded information reporting requirements for banks. The CBO’s estimate of the cost of these changes does not take into account the direct budgetary effects of these proposals. However, it does account for some small positive interactions and assumes that the changes would take effect when the IRS funds those programs. It’s worth checking out the proposal if you’re considering it.