Why Biden’s Proposed Tax Hikes Are a Good Move
By the time of the 2020 election, COVID-19 spending had already pushed the federal budget deficit to a record $3.1 trillion — and that was before two subsequent stimulus packages added trillions more to the tab. To pay for it all, then-candidate Joe Biden proposed raising taxes on corporations and the wealthiest individuals as part of the biggest tax increases since 1993.
Carter Seuthe, CEO of Credit Summit, is one of the many experts who think not only that Biden’s proposed tax hikes are a good thing, but that they should go even farther.
It’s About More Than Just COVID-19 Spending
Pandemic relief has forced the issue, but the progressive coalitions that elected Biden see tax reform as more than just a remedy for emergency deficit spending. They believe as a core principle that the richest Americans simply don’t pay their fair share.
“Right now, people making millions are paying less in taxes than the average American who’s struggling to get by,” Seuthe said. “This is unacceptable. This country was able to expand the most when we actually taxed people appropriately and didn’t hand out tax break after tax break to the ultra-wealthy.”
Biden and his allies believe that Donald Trump’s 2017 Tax Cuts and Jobs Act did exactly that. The president’s plan would roll back key portions of the TCJA that favored the wealthy and use the proceeds to stimulate the economy from the bottom up by giving credits to working families instead.
What’s in Biden’s Plan?
According to the nonprofit, nonpartisan Tax Foundation, Biden’s plan includes several major tax increases for individuals earning more than $400,000, corporations and some other noncorporate businesses like partnerships and LLCs.
“Most American families won’t see a tax increase from the bill as currently proposed,” Seuthe said. “The vast majority of families are not making over $400,000 a year, and those are the people this bill is meant to target.”
For wealthy individuals, the plan would increase their income tax and capital gains tax, add a new payroll tax, reduce exemptions from the estate and gift taxes and eliminate or reduce several deductions.
For businesses, it would increase the corporate income tax, remove protections for “pass-through” businesses like LLCs and add a minimum book tax.
All those new taxes will generate a whole lot of new revenue — $3.33 trillion, according to the Tax Foundation. Part of that will pay for significant tax breaks that could — along with the latest stimulus payments — mean truly game-changing money for lots of low- and moderate-income families. The plan would:
- Expand the earned income tax credit for childless workers ages 65 and older
- Provide renewable energy tax credits to individuals
- Increase the child tax credit from $2,000 to $3,000 with a $600 bonus credit for children under six
- Bring back the first-time homebuyer’s tax credit, which would be good for up to $15,000
- Expand the child and dependent care tax credit from $3,000 to $8,000 in qualifying expenses — up to $16,000 for multiple dependents — and increase maximum reimbursement from 35% to 50%
Some Say It Should Go Farther — And It Might
Massachusetts Sen. Elizabeth Warren is one the loudest progressive voices on the issue of income inequality and wealth distribution. She has proposed a farther-reaching “wealth tax” that would force the very richest Americans — those for whom $400,000 is pocket change — to kick much more into the pot. It would create an annual tax of 2% for all households and trusts of between $50 million and $1 billion. Any wealth over $1 billion would be taxed at a rate of 1% per year.
Many think the president should incorporate Warren’s wealth tax into his own plan — and according to USA Today, he just might.
“I actually feel like it’s a watered-down compromise from better proposals such as Warren’s plan to tax the 1%,” said Seuthe of Biden’s strategy. “And I would bet anything that it will become even more watered-down as it passes through Congress, but it’s a start.”
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