Biden Plan Spares Incomes Under $400,000, Taxes Corporations And The Super Rich, Lowers National Debt

Taxing the rich to fund government services, and to lower the national debt, is extremely popular, and that’s more or less what Biden’s tax policy does.

Joe Biden (Photo by Justin Sullivan/Getty Images)

An independent analysis of Democratic presidential candidate Joe Biden’s tax plan has been released, and it contains good news for anyone earning less than $400,000 a year.

The new Penn Wharton Budget Model accounts for income and payroll taxes, as well as corporate duties. According to this nonpartisan report, Biden’s plan would do very little to tinker with the tax rates of households earning less than $400,000 annually. However, while direct tax rates for middle income earners would be essentially unchanged, these taxpayers would see a slight increase in effective tax rates due to the indirect influence of higher corporate tax rates in Biden’s plan. For instance, researchers calculated that the effective tax rate of the middle 20 percent of earners would increase from the current 16.9 percent to 17.3 percent due to the indirect effects of higher taxes for corporations.

In addition to well-off corporations paying more under Biden’s tax policy, the extremely rich would also face a tax hike, with the top marginal income tax rate increasing to 39.6 percent (what it was before Donald Trump’s 2017 tax giveaway to corporations and the wealthy). Biden’s tax plan would also tax capital gains at the same rate as regular income for top earners (a capital gain is the income you realize when you sell something like a stock at a higher value than the price you got it at), and would impose an additional payroll tax on incomes above $400,000 (right now, payroll taxes are only owed on the first $137,700 of a person’s annual income). Accounting for income, payroll, and corporate taxes, under Biden’s tax proposals, the top 0.1 percent of earners, who make about $3.3 million or more each year, would owe a still relatively modest 43 percent of their income to cover their tax obligations, compared to the approximately 30.6 percent overall tax rate for this group of extremely wealthy people under Trump’s existing taxation framework.

According to the Penn Wharton Budget Model, the $3.4 trillion Biden’s tax plan would raise over the next decade would not directly cover the $5.4 trillion price of his spending proposals. However, the macroeconomic effects of his programs — including educational initiatives like universal pre-K, two years of debt-free postsecondary education for all students, and full tuition at public colleges for students from families earning less than $125,000, as well as infrastructure spending on mass transit, water infrastructure, high-speed rail, and clean energy research — would decrease federal debt by 6.1 percent by 2050 compared to current taxation and spending policy under Trump.

Talking about the capital gains tax and the macroeconomic effects of infrastructure spending might not do much to move the average American, if you put it like that. But taxing the rich to fund government services, and to lower the national debt, is extremely popular, and that’s more or less what Biden’s tax policy does.

According to a recent survey conducted by Harris Poll and Yahoo Finance, about 75 percent of Americans either strongly or somewhat support raising taxes if the money goes to fund government services. More than two-thirds of respondents supported higher taxes even if the money only goes toward lowering the national debt. Biden’s tax plan would do both: fund more and better government services, and, compared to Trump’s plan (or lack thereof), lower the national debt.

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Trump’s reckless spending has been disastrous for the national debt, yet, we have nothing to show for it. We didn’t get better schools, we didn’t get to rebuild our crumbling roads and bridges, we certainly didn’t get a cogent national pandemic response. The rich got a tax cut they didn’t need, and corporations got to do a bunch of stock buybacks.

Biden’s tax plan offers something different. Rather than giving people earning more than $400,000 per year a handout, Biden wants to fund the things that could actually make America great again: an educated workforce prepared for 21st century jobs, transportation infrastructure that could once again be the envy of developed economies, maybe even the international leadership role on environmental issues that disintegrated under Trump. The ultimate difference, though, is pretty simple: Donald Trump wants tax cuts for millionaires at the expense of everyone else, and Joe Biden doesn’t.


Jonathan Wolf is a litigation associate at a midsize, full-service Minnesota firm. He also teaches as an adjunct writing professor at Mitchell Hamline School of Law, has written for a wide variety of publications, and makes it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.

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