Five things to know about Biden’s tax proposals

Democratic presidential nominee Joe Biden has put forth a host of tax proposals to show he would help fund increased spending in areas such as health care, education and infrastructure.

The former vice president is calling for higher taxes on the wealthy and corporations, while also putting forth plans to provide and expand tax credits for lower- and middle-income families.

The right-leaning American Enterprise Institute (AEI) estimated this past week that Biden’s tax plans would raise $2.8 trillion from 2021 through 2030, while the Urban-Brookings Tax Policy Center (TPC), led by a former Obama administration official, put the number closer to $2.4 trillion.

“You could raise a lot of money to be able to invest in things that can make your life easier,” Biden said at ABC News’s town hall on Thursday.

Here are five things to know about Joe Biden’s tax proposals.

Tax relief for low- and middle- income families

Several of Biden’s proposals are aimed at providing relief for low- and middle-income taxpayers, both during the pandemic and beyond.

The former vice president backs a proposal, also included in the initial version of House Democrats’ $3.4 trillion HEROES Act, to temporarily expand the child tax credit. Under the proposal, the credit would be fully refundable so that the lowest-income families could get the full amount of the tax break. The amount of the credit would also be increased from $2,000 to $3,000, or to $3,600 for children under the age of six.

Biden also has offered several proposals to permanently provide targeted tax relief for families. They include expanding the child and dependent care tax credit, providing a tax credit for family caregivers and providing a tax credit for first-time home buyers.

Tax increases aimed at high-income households

Biden has not embraced many of the proposals offered by his progressive rivals during the Democratic primary, such as a wealth tax. But high-income taxpayers would still see significant tax increases if his plans are enacted.

Biden has said he would roll back President Trump’s 2017 tax cuts for people making over $400,000, meaning the top individual income tax rate would increase from 37 percent to 39.6 percent. He also has proposed capping the value of itemized deductions at 28 percent for those with income above $400,000.

Biden would subject earnings above $400,000 to Social Security payroll taxes. In 2020, only earnings under $137,700 are subject to those taxes.

The former vice president also would increase taxes on investment income for high-income people. He would tax capital gains at the same rate as ordinary income for people with income over $1 million, and tax unrealized capital gains at death.

Higher taxes for businesses

Biden is proposing to raise the corporate tax rate from 21 percent — the level set by Trump’s 2017 tax law —  to 28 percent. While the Democratic nominee’s proposed rate is lower than the 35 percent rate in place prior to Trump’s tax law, it’s the same rate that former President Obama proposed when he was in office.

Biden has also proposed increasing the amount of taxes U.S. corporations pay on their foreign earnings. And he has tax proposals aimed at preventing companies from moving their jobs and headquarters overseas.

In an effort to ensure that large, profitable companies such as Amazon pay corporate income taxes, Biden has proposed a 15 percent minimum tax on companies’ income as it’s reported on financial statements. He has also called for doing away with tax breaks that benefit pharmaceutical, fossil fuel and real-estate businesses.

In addition to raising business taxes, he has also proposed tax credits aimed at revitalizing manufacturing facilities and bringing production back to the U.S.

Debate over whether Biden is living up to his $400,000 pledge

Biden has repeatedly said he won’t raise taxes on people making less than $400,000, and his campaign has indicated his proposals would be tailored to meet that objective.

Whether Biden’s proposals meet his pledge has been a topic of debate.

The analyses from AEI and TPC found that lower- and middle-income households on average would see a reduction in their tax burdens in the near term under Biden’s plans because of his proposal to temporarily expand the child tax credit. But in 2030, after that expansion has been expired for a number of years, at least some income groups outside of the top earners would see slight increases in their tax burdens, because the increase in the corporate taxes would lead people to see lower wages and investment income than they otherwise would.

The Biden campaign has questioned the idea that the corporate tax ultimately partially falls on workers.

But Kyle Pomerleau, one of the authors of AEI’s analysis, argued that even if one assumes that the corporate tax only falls on capital, higher corporate taxes would result in higher tax burdens for some middle income people, since those households may own stock in retirement accounts and since increases in corporate taxes can impact the rate of return for non-corporate businesses.

Analysts say that Biden comes closer to meeting his $400,000 pledge when his corporate tax proposals are not taken into account. 

When TPC looked at the distributional effects of Biden’s plans in 2030 excluding the corporate income tax provisions, it found that only those in the highest income groups on average would see an increase in their tax burdens. Households with income between $248,900 and $360,000 would on average see a reduction in their after-tax income of 0.2 percent, while households with income of more than $4 million would see their after-tax income reduced by 13.7 percent.

More specificity than Trump

While Biden has offered a number of specific tax proposals for individuals and businesses, Trump has provided few details about what he would like to do on taxes if he wins a second term.

Trump has said he wants to cut taxes for the middle class, but has not said exactly what this would entail.

He has also floated cutting the top capital gains rate from 20 percent to 15 percent and further lowering the corporate tax rate from 21 percent to 20 percent. And he’s said that he wants to forgive payroll taxes that are deferred under a memo he signed in August.

Much of the time when Trump speaks about taxes on the campaign trail, he is arguing that Biden would increase taxes and hurt the economy as a result.