Joe Biden has pledged to not raise taxes on any American who earns less than $400,000, but a new analysis published this week found that the Democratic presidential nominee’s tax increase proposals could indirectly fall on the middle class.
“If we look at both the legal incidence of the Biden-Harris policy proposals and their economic incidence, we find both direct and indirect tax increases on many taxpayers who earn less than $400,000,” wrote Taylor LaJoie, a policy analyst at the Tax Foundation.
The former vice president has unveiled a multitrillion-dollar agenda that would be funded in large part by higher taxes on wealthy U.S. households – which he describes as anyone earning more than $400,000 annually – and corporations. That includes higher income tax rates, an expansion of the payroll tax for Social Security, new tax credits and fewer deductions.
“I will raise taxes for anybody making over $400,000,” Biden said during an interview with ABC’s David Muir in August. “Let me tell you why I’m going to do it. It’s about time they start paying a fair share of the economic responsibility we have. The very wealthy should pay a fair share – corporations should pay a fair share.”
Biden has promised to roll back other changes made by Trump in the 2017 Tax Cuts and Jobs Act, including restoring the top individual income tax bracket to 39.6% from 37% for those earning more than $400,000 annually.
“When Biden says he will raise taxes on only those earning over $400,000, he is saying his tax law will target only those high-income taxpayers,” LaJoie wrote. “Economists, however, trace the economic impact of these taxes past the person writing the check.”
For instance, hiking taxes on corporations tends to adversely hurt workers in the form of lower wages, according to the Tax Foundation, a center-right think tank based in Washington.
One study published by the American Enterprise Institute, a conservative think tank, found that a 1% increase in the corporate tax rate is correlated with a 0.5% decline in real wages. And in 2007, the nonpartisan Congressional Budget Office determined that workers pay more than 70% of the cost of corporate taxes.
The corporate tax rate is currently at 21%; Biden has vowed to increase it to 28%, which is still below the 35% where it sat for years before President Trump took office.
Some of Biden’s proposals could more directly hit the middle class, including one frequently overlooked part of his platform that would upend the traditional tax preferences of retirement accounts like 401(k) plans…Read more>>