Biden’s Tax Hikes Are Here
As millions of Americans face unprecedented financial hardship as a result of the coronavirus pandemic, the Biden Administration is weighing a range of tax increases and other fees to help fund a massive infrastructure plan that could cost up to $4 trillion.
The Administration will repeal “a lot of” President Donald Trump’s tax cuts, said Senator Joe Manchin (D-WV). It will also increase the corporate rate to “at least” 25%.
“One of the items that he spoke about in his Build Back Better agenda was making sure that people paid their fair share – whether it’s highest income or rolling back some of the corporate tax cuts,” said White House Press Secretary Jen Psaki.
In 2018, President Trump’s Tax Cuts and Jobs Act reduced the corporate tax rate from 35% to 21%. This spurred businesses to return to the US and increase wages and benefits for their workers.
Biden’s tax hikes will increase the rate to 28%. Combined with state taxes, that would see American corporations paying 32% (one of the highest rates in the developed world).
With a higher tax burden, American corporations would have an incentive to send jobs overseas and partner with foreign companies to decrease costs. According to the Tax Foundation, the increased corporate rate would reduce GDP by 0.8%, cut wages by 0.7%, and eliminate 159,000 jobs.
The change would also affect anyone invested in the stock market, including individuals with 401(k)s and IRAs.
Treasury Secretary Janet Yellen has promised to wait until the threat of COVID to the economy has passed before implementing any of Biden’s major tax hikes and says she isn’t worried about inflation.
Additional methods under consideration include:
- Taxing capital gains as ordinary income
- Capping deductions for high earners
- Imposing the Social Security payroll tax on wage above $400,000
- Implementing a carbon tax
“The president believes that there is a path forward on a range of issues where there’s been a history of bipartisan support, including infrastructure,” said Psaki. “Infrastructure improvements are not a Democratic issue, they’re not a moderate issue, a progressive issue, a conservative issue. The American people want their roads, rails, and bridges to be reformed. He feels there’s a path forward.”