The Biden administration has already provided details of its corporate tax proposal and is expected to propose tax changes for individuals in the next few weeks. Meanwhile, the Congress Democrats have some ideas of their own. What can we expect
The best guide to government thinking right now is the tax hikes for individuals that Biden proposed during his presidential campaign. These proposals would only affect taxpayers with incomes over $ 400,000. Here are some key findings from a newly updated analysis from ITEP.
- The income tax and wage tax increases proposed by Biden on the campaign path would have an impact 2 percent from taxpayers and increase $ 216 billion in the tax year 2022.
- 97 percent of the combined personal income tax increases and wage tax increases, the richest 1 percent would be paid.
- The wage tax increase in Biden's campaign plan cannot be enforced through the reconciliation process that lawmakers can use to pass laws.
- The personal income tax increases in Biden's campaign plan alone (without the payroll tax increase) would have an impact 1.9 percent from taxpayers and increase $ 162 billion in the tax year 2022.
- 98 percent of personal income tax increases would be paid by the richest 1 percent.
See ITEP's analysis of Biden's campaign plan for more details.
Trump's tax law places a cap of $ 10,000 on the amount of state and local taxes that taxpayers can deduct from their federal income tax returns.
While these policies appear to be geared towards “blue states” with higher state and local taxes than for reasonable political reasons, simply removing the SALT cap is problematic, as some Congress Democrats have suggested.
- If the tax proposals that Biden put forward during his campaigns were changed to include the lifting of the SALT cap, that would be drained around $ 100 billion of the income generated in the tax year 2022.
- The richest 1 percent would get more than 60 percent of the benefits of lifting the SALT cap, and the richest 5 percent would receive 85 percent of the benefits.
- Lifting the SALT cap, combined with the Biden campaign proposals or in isolation, has essentially the same revenue effects ($ 98 billion versus $ 101 billion) and essentially the same distributive effects.
- In every state and District of Columbia, more than half of the benefits would go to the richest 5 percent of taxpayers.
- In all but four states, more than half of benefits would go to the richest 1 percent.
Download ITEP's national and state estimates of the impact of lifting the SALT cap in 2022.
There are potential alternatives that would bring in as much or more than Biden suggests of those with incomes above $ 400,000, while replacing the SALT cap with another limit on tax breaks for the wealthy who don't target certain states.
- ITEP's proposal for an alternative tax that would replace the AMT and SALT caps and only affect those with incomes above $ 400,000 would increase $ 317 billion in tax year 2022 compared to $ 162 billion that Biden's personal income tax proposals would rise this year.
- ITEP's proposal would increase taxes 1.5 percent the taxpayer in tax year 2022.
- This proposal would be simpler and generate more revenue than Biden's campaign proposals, but would be in line with his commitment not to levy taxes on anyone with an income below $ 400,000.
The ITEP report explaining this proposal provides further details.
During his tenure as president, Biden proposed other tax changes for individuals in addition to tax increases. For example, he proposed expanding the Child Tax Credit (CTC) so that it would eventually come into effect for only one year under the American Rescue Plan Act.
Some lawmakers suggest making the CTC expansion permanent, or at least extending it beyond 2021.
- The CTC extension removes the restrictions on refundability (a lower dollar cap on the repayable portion of the loan and a rule that limits the repayable portion to a percentage of income above a certain threshold). Refundability restrictions prevent almost all low-income families and children from receiving full credit.
- The CTC expansion also increased the maximum balance from $ 2,000 per child to $ 3,000 for each child 6 years and older and $ 3,600 for each child under 6 years of age.
- If Congress extends the CTC extension or makes it permanent, nearly 75 million households with children will benefit from it by 2022.
Download ITEP's national and state estimates of the impact of expanding the CTC expansion in 2022.