So Biden needs to lift taxes for the wealthy and companies

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So Biden wants to raise taxes for the rich and corporations

By Tami Luhby and Katie Lobosco, CNN

(CNN) – After President Joe Biden signs the $ 1.9 trillion Democratic bailout package, President Joe Biden moves to the next few items on his legislative agenda – laying the groundwork for the tax hike for wealthier Americans to pay for .

He is expected to outline the next step on his economic agenda during a joint session with Congress on April 28th.

Biden has doubled his candidate vows, stating that those who earn more than $ 400,000 will see “a small to significant increase in taxes.” However, he has pledged that those below that “won’t see a single penny in the extra federal tax” – and he’s already working to make several large, if temporary, tax breaks permanent for low-income and middle-class Americans were part of the stimulus. These These include enhancements to the Child Tax Credit and Earned Income Tax Credit, as well as more generous incentive grants under the Affordable Care Act.

(More on the impact on those who later make less than $ 400,000.)

Much of Biden’s plan relies on reversing Republican tax cuts for 2017, which were weighted more heavily on those at the higher end of the income ladder, although many key provisions will expire after 2025.

In March, White House press secretary Jen Psaki said Biden believes “the front runners are not doing their part” and “obviously corporations could pay higher taxes”.

Biden has not tabled a formal tax proposal since taking office, although it is expected that he will soon announce measures to fund his infrastructure, clean energy and other restoration efforts.

During his search for the White House last year, he released a plan to increase federal revenue by $ 2.1 trillion in a decade. This emerges from an impartial analysis by the Tax Policy Center in November.

While his proposal is likely to be changed by Congress, it is expected to find a warm welcome on Democratically controlled Capitol Hill. More progressive lawmakers, including Massachusetts Sens. Elizabeth Warren and Vermont Bernie Sanders, are already re-circulating the controversial wealth tax they proposed in their recent Democratic presidential campaigns.

Here’s what Biden suggested on the Campaign Path:

Increase in the highest federal income tax rate

Biden called for the return of the highest limit rate to 39.6% – this was the rate when Republican President George W. Bush was in office. The 2017 tax cut reduced this rate to 37%.

Several sources familiar with the ongoing discussions confirmed to CNN that the plan would raise the highest marginal tax rate for households with incomes of $ 400,000 or more to 39.6%.

White House officials have stressed that the details of the plan are not finalized and may change before the joint address. Biden continues to hold meetings with politicians to finalize the details.

Biden said in an interview with ABC News in March that the increase would raise $ 230 billion, roughly double the Tax Policy Center’s estimate to raise the tax rate for those who earn about $ 400,000 a year. Such a move would capture some people whose top rate is currently 35% and anyone who is in the 37% class, said Howard Gleckman, senior fellow at the center.

His proposal would also make two changes that would limit the value of individual deductions for taxpayers above that income threshold, which would generate an additional roughly $ 275 billion, the center noted.

For example, it is estimated that the top 1% of the workforce will see an average decrease in after-tax income of 15.6% in 2022, according to the center.

Increase in taxes on capital gains

Those who earn more than $ 1 million annually would have to pay higher taxes on capital gains, according to Biden’s campaign proposal, which usually make up the largest part of the income of the wealthy.

These taxpayers’ long-term capital gains would be subject to the highest marginal rate on wages – 37% currently, but soar to 39.6% under its broader plan.

This would tax those gains as ordinary income, nearly doubling the rate at which they are currently taxed, and undo the distinction with short-term capital gains already taxed as ordinary income for assets held for less than a year. Sources familiar with the discussion confirmed that this provision is still in the plan.

Whether capital gains should be taxed at the same rate as income has been a longstanding battle on Capitol Hill that many Democrats advocated.

Currently, investments held for at least a year are subject to a federal peak capital return rate of 20%. Individuals earning $ 200,000 per year and married couples earning $ 250,000 per year pay an additional 3.8% tax on their capital gains to help fund the Affordable Care Act.

Taxation of unrealized capital gains upon death

Currently, heirs of wealthy Americans enjoy a huge tax break. Assets given directly to them receive a “top-up” on their cost base, which means that they are valued at the time of death. This can minimize the tax levy on the heirs when they eventually sell the property. And it means that the profits made during the life of the deceased parent are never taxed.

Biden would require the estates to pay taxes on the unrealized gains on these assets.

That move, along with the increase in the capital income tax rate, would raise $ 370 billion over 10 years, according to the Tax Policy Center.

Wandering wage taxes on the rich

As part of his campaign platform, Biden wanted to make wages in excess of $ 400,000 subject to Social Security wage tax, which is currently capped at $ 142,800 for 2021.

Employees and their employers each pay 6.2% of wages to fund social security. Biden’s provision would create a donut hole where earnings are below the cap and above the new threshold that is subject to wage tax.

That would gross in $ 740 billion over a decade.

Increase in federal estate tax

Biden would rewind inheritance tax policy to 2009, when the federal exemption was $ 3.5 million per person and the tax rate was 45%.

Previous changes to tax law had raised the exclusion to $ 5.5 million and lowered the tax rate to 40% by 2017. The Republicans’ tax cuts have significantly increased the tax exemption, which now stands at $ 11.7 million per person in 2021, while maintaining the 40% tax rate.

The estate tax changes would generate additional revenue of $ 218 billion, according to the Tax Policy Center.

Increase in taxes on companies

Biden would reverse some of the 2017 tax cuts on the corporate tax rate. It would increase it from the current 21% to 28%, but not as high as the 35% maximum that existed before the Republican tax breaks.

His campaign platform also called for the introduction of a more aggressive minimum tax on multinational corporations and the taxation of book revenue reported to shareholders rather than revenue reported to the Internal Revenue Service, among others.

These business tax hikes are the largest part of Biden’s campaign proposal, generating roughly $ 1.3 trillion in revenue for over a decade.

Here’s the impact on those making less than $ 400,000

During the ABC News interview, Biden reiterated his promise not to levy taxes on anyone earning less than $ 400,000 a year – a claim he made repeatedly during his campaign. That would cover around 90% of taxpayers.

An analysis of Biden’s campaign proposals by the Tax Policy Center, as well as the Federal Responsible Budget models and the Penn Wharton budget model, found this to be the case. They show that families earning less than $ 400,000 a year are not seeing any direct increases in federal taxes.

In fact, middle-income households could see an average tax cut of $ 680, and low-income households could cut their tax burdens by $ 760 for 2022, according to the center.

However, when looking at indirect taxes, the story looks a little different, like Biden’s proposed increase in corporate tax. Economists believe that workers ultimately bear part of the cost of these taxes. They won’t see a higher income tax rate, but their after-tax wages might end up being lower.

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