Former Vice President Joe Biden. (Photo: Ryan Collerd/Bloomberg)
Raising taxes will be a given, regardless of who wins the White House — that’s the consensus as the nation deals with the deficit and debt fueled by the pandemic stimulus.
Among Democratic presidential candidate Joe Biden’s top tax moves would be to create a Social Security “donut hole” payroll tax.
As the Tax Foundation explained in its analysis, Biden’s plan imposes a 12.4% payroll tax on income earned above $400,000, evenly split between employers and employees. This revenue would go to the Old-Age, Survivors, and Disability Insurance programs — that is, the Social Security trust funds.
“This would create a ‘donut hole’ in the current Social Security payroll tax, where wages between $137,700, the current wage cap, and $400,000 are not taxed,” the Tax Foundation states.
According to a new analysis by the Wharton School at the University of Pennsylvania, Biden’s tax plan would, in a 10-year window, raise $3.375 trillion in new tax revenue while increasing spending by $5.37 trillion.
Including macroeconomic and health effects, by 2050 the Biden platform would decrease the federal debt by 6.1% and increase GDP by 0.8% relative to current law, Penn Wharton states.
“Almost 80% of the increase in taxes under the Biden tax plan would fall on the top 1% of the income distribution,” according to the analysis.
Under the Biden tax plan, households with adjusted gross income of $400,000 per year or less would not see their taxes increase directly but would see lower investment returns and wages as a result of corporate tax increases, according to the analysis.
Those with AGI at or below $400,000 would see an average decrease in after-tax income of 0.9% under the Biden tax plan, compared to a decrease of 17.7% for those with AGI above $400,000 (the top 1.5%).
Biden’s tax plan, the analysis explains, focuses on raising taxes on corporations, capital income, and ordinary income of high-income filers by:
- Implementing a Social Security “Donut Hole”;
- Repealing elements of the Tax Cuts and Jobs Act (TCJA) for high-income filers;
- Raising the top rate on ordinary income;
- Eliminating stepped-up basis;
- Taxing capital gains and dividends at ordinary rates;
- Limiting itemized deductions; and
- Raising the corporate tax rate.
Biden stated recently that he would raise the corporate tax rate from 21% to 28% “on day one.”
Biden told CNN that “the reason I’d make the changes to corporate taxes, it can raise $1.3 trillion if they just started paying 28% instead of 21%.”
The corporate tax rate was slashed from 35% to 21% by the Tax Cuts and Jobs Act — the sweeping tax overhaul enacted in 2017.
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