America’s rich will owe more to the IRS under Biden’s latest tax plan — but are they the only ones?
As the shape and contents of the proposed Democratic bill strengthening the social safety net come into focus, so is the size of the tax bill that rich people are poised to receive.
But are they going to be the only ones bound for more taxes?
New estimates from the Tax Policy Center are projecting that the top 1% — households making at least $885,000 a year — could pay an extra $55,000 in taxes next year if the Build Back Better bill passes in its current form.
Meanwhile, the top 0.1%, households making more than $4 million, would be paying an extra $585,000 next year, the think tank’s models said.
“The top 0.1%, households making more than $4 million, would be paying an extra $585,000 next year, according to new estimates released by the Tax Policy Center.”
The latest version of the Build Back Better bill doesn’t include income tax or capital gains rate hikes. But the White House says it would close certain loopholes allowing some wealthy taxpayers to avoid a 3.8% Medicare tax and it applies a 5% surtax on households making at least $10 million and an 8% surtax on households making above $25 million.
Now factor in a proposed 15% minimum tax for large corporations that could begin in 2023. That could eat into the net worth of equities these high-income earners have as shareholders.
The average extra tax costs for the 1% could grow to $80,000 on average in 2023, and it could rise to an average $750,000 for the 0.1%, said Howard Gleckman, senior fellow at the Tax Policy Center.
President Joe Biden campaigned on no new taxes for people making under $400,000. So does the estimate show this latest iteration sticking with that pledge?
It might be a matter of which way you want to look at it, Gleckman said. Focusing only on direct taxes, like individual income taxes and payroll taxes, less than 0.1% of households making under $500,000 would be paying more taxes, he noted.
Now apply the consequences of extra corporate taxation, which could affect the wages of workers in those companies and the stock price of shareholders.
Around 20% to 30% of middle-class households would indirectly pay more taxes next year, Gleckman said. But for a family making less than $100,000, it’s average $100 less in after-tax income. “It’s very, very small, but it’s there,” he said.
“A family making between $200,000 and $500,000 would have an average $230 less in after-tax income, factoring in the consequences of all the tax proposals.”
A family making between $200,000 and $500,000 would have an average $230 less in after-tax income, factoring in the consequences of all the tax proposals, Gleckman said.
This version of the tax bill “basically retains that basic framework” of no new taxes from Biden for lower- and middle-class families, Gleckman said. “If you are measuring the individual tax changes only,” the proposal does meet the Biden campaign pledge, at least in Gleckman’s view.
White House Press Secretary Jen Psaki on Friday said the Tax Policy Center analysis did show low- and middle-class families reaping benefits from the tax plan.
Whatever the effects of the tax proposal may be, the White House has another problem with inflation gnawing into all budgets, especially those of low- and middle-class families. And that is its own kind of tax problem — or at least as the late economist Milton Friedman put it, noting that inflation is taxation without legislation.
The pace of inflation hit a 31-year high in October, according data released earlier this week.
“Our view is the real risk is inaction,” Psaki said Friday, because the Build Back Better proposal would address child-care costs and attempt to curb prescription drug prices. “Our view is this is strong case for moving forward with this agenda.”