House Democrats unveiled a big taxThis week’s hike plan that dramatically increases the rates paid by wealthy Americans and corporations – but the proposal could also have long-term implications for the middle class.
The proposal would overturn key elements of the Republicans’ tax law of 2017, including restoring the individual income rate to above 39.6%.
BIDEN TAX PLAN CALCULATOR: HOW MUCH WILL YOU PAY FOR THE NEW PROPOSALS?
The new rate would apply to singles with taxable income over $ 400,000, according to a copy of the legislative outline. It would also apply to married people filing jointly whose taxable income exceeds $ 450,000; heads of households with incomes over $ 425,000; married persons filing separate returns over $ 225,000; and estates and trusts over $ 12,500.
The plan also includes a 3% surtax on income in excess of $ 5 million and maintains a net investment income tax of 3.8% in place.
A distributional analysis released Tuesday by the non-partisan Joint Committee on Taxation, found that taxes would increase only for the top end of households in the first year of implementing the increases. But over time, once the expansion of the child tax credit is completed, the average tax rate would increase for those on low incomes as well.
SOME RETIREES COULD SEE A 5% INCREASE IN SOCIAL SECURITY WITH BIDEN AS CHAIRMAN
By 2027, the average tax rate for people earning between $ 50,000 and $ 75,000 would rise by about 1%, according to the analysis. The rate would be slightly higher for people earning between $ 75,000 and $ 100,000, up 1.3%. The tax rate would increase 1.5% for those earning between $ 100,000 and $ 200,000 would see an increase of 1.5%.
Average rates would also be higher for these income brackets until 2031, according to the analysis.
Yet the increases apparently contradict Biden’s campaign promise that no one earning less than $ 400,000 would pay higher taxes if elected.
“Anyone earning more than $ 400,000 will see a small to large tax increase,” Biden told ABC News earlier this year. “If you earn less than $ 400,000, you won’t see a single penny of additional federal tax.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
Assuming the proposal becomes law – which depends on a deeply divided Congress – the new tax rate would begin to apply in fiscal year 2022. It would generate around $ 2.1 trillion in the next. decade, according to an estimate by the Joint Committee on Taxation.
The maximum rate is currently paid by singles earning more than $ 518,401 and married people reporting jointly earning more than $ 622,051.
The enhanced child tax credit is set to end next year, though Democrats hope to include a five-year extension as part of the $ 3.5 trillion tax and spending bill, which would significantly expand the social safety net if adopted.