WASHINGTON—Joe Biden, former vice president and presumptive Democratic nominee for president, has proposed to reform the U.S. tax code to make it “more progressive and equitable,” as stated in the “Biden-Sanders Unity Task Force Recommendations.”
While proponents applaud the plan for addressing wealth and income inequality, critics argue that it would raise taxes on the majority of Americans and hurt the economy.
Biden would enact a number of policies that raise taxes on high-income households and corporations. It would repeal major provisions of the 2017 Tax Cuts and Jobs Act (TCJA), President Donald Trumps massive tax reform package.
According to experts, Bidens tax plan would make the tax code more progressive, with an increased tax burden falling on the top 1 percent of income earners.
“Its probably one of the most progressive tax plans weve seen from a presidential nominee from one of the two major parties in many, many years,” Steve Wamhoff, director of federal tax policy at the Institute on Taxation and Economic Policy, told The Epoch Times.
Unlike Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.), Biden hasnt advocated for a wealth tax. However, Bidens plan “definitely would go a long way to reduce income inequality, and also wealth inequality,” according to Wamhoff, who previously worked for Sanders as a senior tax policy analyst.
“We know that income is concentrated at the top, but wealth is even more concentrated at the top. So its really important not only that we tax high-income people but that we tax the income from wealth,” Wamhoff said.
And Bidens plan achieves this objective in several ways, he said.
For taxpayers earning more than $400,000, Bidens plan would raise the highest personal income rate back to the pre-TCJA level of 39.6 percent, from 37 percent. The plan would also raise the payroll tax for high-income individuals by applying it to earnings over $400,000.
In addition, it taxes long-term capital gains and dividends as ordinary income, applying the 39.6 percent tax on income above $1 million.
Bidens tax policy is aggressive, according to experts, as it raises a significant amount of revenue relative to previous proposals.
The plan would raise federal tax revenue by nearly $3.8 trillion over the next decade, according to the Tax Foundation; thats significantly higher than the revenue projected in Hillary Clintons tax proposal during the 2016 presidential race. The Tax Foundation had estimated Clintons plan would boost tax revenue by $1.4 trillion over a 10-year budget window.
Although the plan is geared toward higher-earners, “there is a negative effect across the board for all income groups,” according to Garrett Watson, senior policy analyst at the Tax Foundation.
In a report released in April, Watson and his colleagues estimated that the plan would pare after-tax income by 7.8 percent for the top 1 percent of taxpayers, by 1.1 percent for the top 5 percent and about 0.6 percent for other income quintiles.
On the corporate side, Bidens plan increases the tax rate from 21 percent to 28 percent, and introduces a 15 percent minimum tax on large corporations book profits.
A corporations book income can differ from the income reported on federal income tax returns. Hence, applying a 15 percent minimum tax on corporations book income over $100 million would prevent corporations such as Amazon from paying zero in taxes.
The chief complaint about the proposal is that it would hurt the economy in the long term because it discourages savings, investment, and business formation. Critics also argue that it would fail to reduce the income and wealth gap in the country.
According to the Tax Foundation report, Bidens tax plan would shrink the economys size by 1.51 percent in the long term because of higher marginal tax rates on labor and capital. It would also reduce the overall wage rate by 0.98 percent, leading to 585,000 full-time job losses.
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