Biden’s Proposals for Tax Increases
With the media not interested in reporting what Joe Biden’s progressive proposals mean for taxes, the WSJ steps up to the plate and examines the fine print:
Phony Joe Biden’s Tax Agenda
Revenue estimates for Mr. Biden’s tax agenda vary, from $4 trillion over a decade to $3.2 trillion, after accounting for how it would shrink the economy. But analysts confirm the phoniness of Mr. Biden’s pledge to not raise taxes on anyone earning under $400,000/year.
Over the long run, the Tax Foundation said in April, Biden’s main tax proposals would lower after-tax incomes for every quintile, including 1.4% for the middle class.
Raise the top marginal rate to 39.6%, from 37%. Repeal the $10,000 cap on the deduction for state-and-local taxes, giving a bigger break to places like San Francisco and New York. But limit the tax benefit of itemized deductions to 28% of face value, hitting higher earners.
Apply a 12.4% Social Security tax, split between workers and their employers, to all income over $400,000, with no cap. The current payroll tax comes off after $137,700 of income, but under Mr. Biden’s plan the levy would be limitless. No more polite fiction of Social Security as an “earned” benefit.
Marginal Tax Rate 60%
Economists say the payroll tax falls mainly on workers, even though half is purportedly “paid” by employers. All together, including Mr. Biden’s 39.6% rate on income, the federal government’s top marginal tax on labor would be higher than 50%. Factor in state income taxes—California’s 13.3% top rate or New Jersey’s 10.75%—and the marginal rate would hit the 60s.
For those earning more than $1 million, tax capital gains and dividends as regular income, at the new top rate of 39.6%. That’s almost double the current top rate of 23.8%, including the ObamaCare surtax. Capital gains haven’t been taxed as heavily as Mr. Biden proposes since the bad old 1970s.
Where Will It Stop?
Last year the ranking Democrat on the Senate Finance Committee, Oregon’s Ron Wyden, suggested taxing unrealized gains, before the investor sells, using a mark-to-market scheme. The wealthy would pay taxes each year on their paper gains, though there are a host of problems, like how they’d value illiquid assets and if they’d get a refund when the market subsequently fell (don’t count on it).
Repeal stepped-up basis at death. This could mean slapping capital-gains taxes on the dearly departed. Or the property received by heirs would arrive with taxable capital gains hidden inside, and no adjustment for inflation. Mr. Biden hasn’t said what he’d do to the estate tax, currently set at 40%, above an individual exemption of about $11.6 million. But his new pal Bernie Sanders wants to lower the exemption to $3.5 million and lift rates up to 77%.
Raise the rate to 28%, from 21%. To see how this would compare globally, add America’s state taxes on corporate income: up to 8.84% in California or 9.5% in Illinois. Last year the European Union’s average top statutory rate was 21.8%. Don’t be surprised if U.S. companies return to the pre-Trump pattern of moving their headquarters overseas.
Put a 15% minimum tax on the “book income” of businesses with $100 million in profits. Mr. Biden’s campaign said last year it would affect about 300 companies, though draining their capital could slow down America’s economic dynamos.
Since Mr. Biden’s other tax increases would raise the business incentives to shift income abroad, double to 21%, from 10.5%, the minimum tax on “global intangible low tax income.”
Create or expand a plethora of tax credits: a new refundable and “advanceable” $15,000 “down payment tax credit for first-time home buyers”; $8,000 for “child and dependent care”; $5,000 for “informal caregivers”; $5,000 for “hiring a person with a disability”; a low-income renter’s tax credit “designed to reduce rent and utilities to 30% of income.”
Mr. Biden has yet to figure out how to pay for the full spending agenda he is laying out on behalf of the radical left. In his false claim that his tax proposals will soak only the affluent, Biden is being patently dishonest. His tax proposals won’t raise nearly enough money to finance all of his progressive plans.
In the end, as the WSJ notes, everyone will pay.