Biden Administration Eyes Tax Hikes
Last week, President Biden signed the $1.9 trillion American Rescue Plan into law. This bill has been a long time coming and is something that both the House and Senate have been working on for the past few months to provide Americans with economic relief from the COVID-19 pandemic.
The law includes $1,400 checks for middle- and lower-income Americans, extends unemployment insurance through most of the summer, and provides $70 billion to increase vaccine distribution and coronavirus testing. Individuals making up to $75,000 and couples making up to $150,000 per year are eligible to receive a $1,400 check. Americans earning between $75,000–$80,000 and couples earning between $150,000–$160,000 will receive some of that money but not the full $1,400 amount.
The American Rescue Plan is one of the most notable accomplishments of the 2-month-old Biden administration. In addition to this law, the administration has reportedly been eyeing several tax hikes to pay for a significant new infrastructure bill and to help minimize the United States’ ballooning deficit. However, actually getting support for these infrastructure investments could be difficult — a lot more difficult than it was for the administration to get support for the American Rescue Plan.
Stifel Chief Washington Policy Strategist Brian Gardner had this to say about a tax hike:
The politics of a tax bill are likely to be more challenging than the politics of passing an emergency spending bill. Most lawmakers like spending money and being seen as caring and empathetic during a health crisis. However, voting for a tax bill is not as popular since it could include hard choices for key industries and political supporters back home. Given Democrats’ razor-thin majorities in both House and Senate, any dissension could be fatal to the bill.
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Gardner doesn’t believe it’s impossible to get support for a tax hike that’s specifically aimed at infrastructure. In fact, Gardner came up with examples of several tax hikes that Congress and the Biden administration could pass during this politically polarized climate:
- Raising the corporate income tax rate to 28% from 21%.
- Doubling the global intangible low-taxed income rate to 21% from 10.5%.
- Lifting the top tax rate to 39.6% from 37% for individuals making over $400,000.
- Taxing capital gains as ordinary income for those earning more than $1 million a year.
- Hiking the estate tax rate to 45% from 40% for assets worth more than $1 million.
These tax increases expected from the Biden administration would be the first major federal tax hike in almost 30 years. Sources reportedly told Bloomberg that the provisions under consideration include:
- Raising the corporate tax rate to 28% from 21%.
- Paring back tax preferences for so-called pass-through businesses, like limited liability companies or partnerships.
- Increasing the income tax rate on individuals earning more than $400,000.
- Expanding the estate tax.
- A higher capital gains tax rate for individuals earning at least $1 million annually.
An analysis by the Tax Policy Center of Biden’s campaign tax plan estimated that it could raise $2.1 trillion over 10 years. U.S. Treasury Secretary Janet Yellen said that this plan is expected to be introduced later this year. The details, which are still being worked out, will be revealed in time.
Until next time,