Biden’s tax plan: key policies ahead of the US election
Learn about Joe Biden’s tax plan to understand how his policies might affect your income and tax liabilities.
Summary
The Biden tax plan aims to increase revenue from high-income households and corporations while providing relief to middle- and lower-income families.
Changes to capital gains tax include taxing gains at the same rate as ordinary income for households earning over $1 million.
Unbiased will connect you with an advisor for expert financial advice on how to optimize your tax planning.
What are Joe Biden’s tax policies?
Ahead of the upcoming election, President Joe Biden's tax plan stands as a pivotal issue aimed at addressing economic disparity and funding critical public investments.
Biden’s tax plans are designed to increase revenue by targeting high-income households and corporations while providing relief to middle- and lower-income families.
These changes overarching goals are to promote economic fairness, reduce the federal deficit, and invest in essential public services like healthcare, education, and infrastructure.
What are the proposed tax changes?
The Biden tax plan seeks to create a more equitable tax system by implementing several key changes.
One of the primary features is the increase in tax rates for high-income earners and corporations. The plan targets individuals earning over $400,000 and married couples earning over $450,000, restoring the top marginal tax rate to 39.6%.
Biden’s tax plan includes further measures to prevent profit shifting and tax avoidance by multinational companies, such as replacing the base erosion and anti-abuse tax (BEAT) with a rule aligned with global minimum tax standards and increasing the global intangible low-taxed income (GILTI) rate.
Biden's proposed tax plan also expands tax credits to support families and workers. The Child Tax Credit would be made fully refundable and temporarily increased, while the Earned Income Tax Credit would see permanent expansions. Other tax credits related to childcare, healthcare, and renewable energy would also be enhanced.
Biden’s tax plan aims to increase revenue through higher excise taxes on stock buybacks and raising tariffs on specific goods. These changes are intended to ensure that wealthier individuals and profitable corporations contribute a fair share to federal revenue, ultimately funding public investments and reducing economic inequality.
Changes to capital gains tax
In the Biden tax plan, capital gains changes include taxing capital gains at 39.6%, the same rate as ordinary income for households earning over $1 million.
This substantial increase from the current top rate of 20% aims to align investment income taxation with wages, ensuring fairness.
High-income investors might alter their strategies, potentially affecting the real estate market as tax benefits of like-kind exchanges are limited.
Adjustments to income tax
The Biden tax plan restores the top marginal income tax rate to 39.6% for individuals earning over $400,000 and married couples earning over $450,000.
This reverses a reduction from the 2017 Tax Cuts and Jobs Act.
Additionally, a minimum 25% tax on billionaires ensures the wealthiest contribute proportionately.
Middle-class taxpayers will benefit from provisions like the expanded Child Tax Credit, offering increased benefits and full refundability.
Corporate tax rate modifications
The Biden tax plan proposes increasing the corporate tax rate from 21% to 28%.
This change aims to fund public services and infrastructure projects. While higher corporate taxes might reduce profit margins and increase consumer prices, they are expected to drive long-term economic growth through investments in public goods.
Biden’s tax plan for small businesses includes specific provisions to ensure the corporate tax rate increase does not disproportionately impact them.
These measures include expanding tax credits and deductions that small businesses can use to offset their tax burdens.
Expansions in tax credits
The Biden tax plan expands several tax credits to support low- and middle-income families.
The Child Tax Credit would be extended with higher benefits and full refundability.
The Earned Income Tax Credit for workers without qualifying children would see permanent expansions.
New or expanded tax credits for childcare, healthcare, and renewable energy aim to alleviate financial burdens and promote sustainable practices.
What is Biden’s approach to international taxation?
Biden's international taxation reforms address profit shifting and tax avoidance by multinational corporations.
The plan includes repealing provisions of the 2017 TCJA and introducing a global minimum tax to ensure fair taxation.
These policies aim to curb offshoring, encourage domestic investment, and generate additional revenue.
What are the pros and cons of Biden’s tax plan?
Is Biden’s tax plan good? There are several potential benefits, but it also comes with drawbacks.
Pros
Increased revenue: Biden’s plan expects to raise over $4.5 trillion over the next decade.
Economic equity: Aims to reduce income inequality.
Support for families: Expands tax credits for vulnerable populations.
Medicare solvency: Ensures long-term solvency by redirecting and increasing the NIIT.
Cons
Economic impact on high earners: Could discourage investment and economic growth.
Business costs: Increased corporate taxes may lead to higher prices and lower profits.
Real estate market: Slows high-value transactions due to changes in capital gains taxation.
Implementation challenges: Significant opposition in Congress may hinder enactment.
Get expert financial advice
Joe Biden's tax plan represents a comprehensive effort to address economic inequality and fund public investments by increasing taxes on the wealthiest individuals and corporations.
While it promises substantial benefits for middle and low-income families, it also poses challenges that could impact investment and business dynamics.
Let Unbiased connect you with a financial advisor for expert financial advice on personalized tax planning and optimization strategies.
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