Early analysis of Biden’s proposed tax plan

This article is based on the Urban-Brookings Tax Policy Center’s summary of the tax proposals provided by Former Vice President Joe Biden’s campaign. This information is not definitive. Discussion points on this topic will likely be in flux throughout the campaign.

The nonpartisan Urban-Brookings Tax Policy Center (TPC) recently published an analysis of the tax proposals outlined in Joe Biden’s 2020 presidential campaign. Let’s look at the details they shared.

From 2021 to 2030, Biden’s plan would generate an additional $4 trillion (1.5% of Gross Domestic Product) in tax revenue, with much of the funds coming from the country’s wealthiest households. The plan would result in an additional $6.2 trillion in tax revenue from 2031 to 2040. In the first 10 years, half of that $4 trillion will be paid by businesses and half will be paid by high-income individuals.

The wealthiest households (those earning the highest 1% of income, at least $837,000 per year) will see an average tax increase of almost $300,000—about 17% of after-tax income. The upper tier of the 1% (the top 10th) will pay an average of $1.8 million in additional taxes.

The average tax increase for households earning between $52,000 and $93,000 would be about $260—about 0.4% of after-tax income. The average increase for households earning less than $26,000 would be just $30, or 0.2% of income after taxes.

Looking at the math in other ways, the top 1% of households will pay about 74% of the increased taxes under Biden’s proposal, and the top 20% of households (earning over $170,000 per year) will pay 93% of the increases. The lowest 80% of earners won’t see tax increases higher than 0.5%.

Biden’s plan also lowers tax subsidies on commercial real estate and fossil fuels; adds tax subsidies for renewable energy, energy efficiency and electric vehicle investments; and changes tax incentives related to retirement saving.

The major facets of Biden’s tax plan are summarized below.

Income and Payroll Taxes for High-Income Individuals

  • Roll back 2017 Tax Cuts and Jobs Act (TCJA) reductions to income taxes for individuals earning more than $400,000 per year.
  • Reduce the value of itemized deductions for taxpayers in income tax brackets higher than 28%.
  • Even out the tax rate for capital gains and dividends and ordinary income for taxpayers earning more than $1 million per year.
  • Tax unrealized capital gains higher than $100,000 upon death (not including money inherited by spouses or charitable organizations).
  • Subject incomes over $400,000 to Social Security payroll taxes.

Taxes for Businesses

Increase the corporate tax rate to 28% (up from 21%).

  • Institute a minimum tax of 15% on financial statement income.
  • Substantially increase the minimum tax on profits made overseas to 21% (from 10.5%).

Families, Investments and Retirement

Reduce expenditures for fossil-fuel production and commercial real estate investments.

  • Increase tax credits for electric vehicle, renewable energy and energy-efficient technology investments.
  • Increase tax benefits for family caregiving, student loans and childless workers over 65 years old.
  • Replace traditional IRA deductions and defined-contribution pension plan contributions with refundable tax credits.
  • Utilize automatic enrollment for most workers with no pensions in IRAs.

Curious about how you can be prepared whichever way 2020 goes? Contact your CSH advisor—this is going to be a big year with a number of influential tax changes, and we can ensure you’re ready.

This article is based on the Urban-Brookings Tax Policy Center’s summary of the tax proposals provided by Former Vice President Joe Biden’s campaign. This information is not definitive. Discussion points on this topic will likely be in flux throughout the campaign.

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