A large part of Biden’s plan is based on reversing the 2017 Republicans’ tax cuts, which have been weighted more heavily than those at the top of the revenue ladder, although many important provisions will expire after 2025.
Biden has not issued a formal tax proposal since taking office, but is expected to unveil measures soon to fund his infrastructure, clean energy and other recovery efforts.
During his bid for the White House last year, he unveiled a plan that would increase federal revenue by $ 2.1 billion over a decade, according to a November nonpartisan tax policy analysis.
This is what Biden suggested on the campaign:
Raising the highest federal income tax rate
Biden called for the highest marginal rate to be reduced to 39.6%, noting that this was the rate when President George W. Bush, a Republican, was in office. The tax cut in 2017 reduced the rate to 37%.
Biden told ABC News that this increase would yield $ 230 billion, which is about double the estimate of the tax policy center for raising the rate on those earning about $ 400,000 a year. Howard Gleckman, senior fellow at the center, will catch people of whom the highest rate is currently 35% and all in the 37% category, with such a move.
His proposal would also make two changes that would limit the value of the specific deductions for taxpayers above the income threshold, which would still yield about $ 275 billion, the center found.
According to the center, for example, the top 1% of earners in 2022 will get an average decrease of 15.6% in income after tax.
Increase in tax on capital gains
According to Biden’s campaign proposal, those who earn more than $ 1 million a year should pay higher taxes on capital gains, which usually make up the bulk of the income for the rich.
The capital gains of these taxpayers are subject to the highest marginal rate for wages and salaries – currently 37%, but rise according to its broader plan to 39.6%.
Whether capital gains should be taxed at the same rate as income was a long battle on Capitol Hill, and many Democrats preferred it.
Tax on unrealized capital gains on death
At present, heirs of wealthy Americans enjoy a major tax break. Assets transferred directly to them receive an increase in their cost base, which means that they are valued on the date of death. This could reduce the tax burden on the heirs if they end up selling the assets.
Biden will have to pay estates for the unrealized gains on these assets.
This measure, together with the increase in the rate on capital gains tax, will, according to the Tax Policy Center, raise $ 370 billion over ten years.
Step on taxpayers on the rich
As part of its campaign platform, Biden wanted to subject wages of more than $ 400,000 to the social security wage tax, which is currently limited to $ 142,800 for 2021.
Workers and their employers each pay 6.2% of their wages to finance social security. Biden’s provision will create an oil bubble, with earnings below the limit and above the new threshold, subject to payroll tax.
It will generate $ 740 billion over a decade.
Increasing the federal estate tax
Biden would rewind the tax policy back to 2009, when the federal exemption was $ 3.5 million per person and the rate was 45%.
Previous tax changes have increased the exclusion to $ 5.5 million and reduced the rate to 40% by 2017. The Republican tax cuts have significantly increased the exemption, which now stands at $ 11.7 million per person for 2021 and retains the 40% rate.
According to the Tax Policy Center, the tax changes would bring in an additional revenue of $ 218 billion.
Tax increases on corporations
Biden will reverse a portion of the 2017 tax cuts to the corporate tax rate. He will increase it to 28%, compared to the current 21%, but not as high as the top rate of 35% that existed before the Republican tax cuts.
Its campaign platform also called for the introduction of a more aggressive minimum tax on multinational corporations and to tax tax returns reported to shareholders, not the revenue reported to the Internal Revenue Service, among others.
These business tax increases are the biggest component of Biden’s campaign proposal, which generates about $ 1.3 billion in revenue over a decade.
Here’s the impact on those earning less than $ 400,000
During the ABC News interview, Biden reiterated his promise not to raise taxes on anyone earning less than $ 400,000 a year – a claim he made repeatedly during his campaign. It will cover about 90% of the taxpayers.
An analysis of Biden’s campaign proposals by the Tax Policy Center, as well as models from the Committee for a Responsible Federal Budget and the Penn Wharton budget model, found this to be true. They point out that families earning less than $ 400,000 a year will not see a direct increase in federal taxes.
In fact, middle-income households could see an average tax cut of $ 680 and low-income households could lower their 2022 tax bills by $ 760, the center found.
But the story is a little different when we consider indirect taxes, like raising companies that Biden proposes. Economists assume that employees ultimately bear the cost of the tax. They will not see a higher income tax rate, but their wages after tax may end up being lower.
CNN’s Jason Hoffman contributed to this story.