Well, you probably didn’t think that, but you might have hoped common sense would prevail.
Biden’s economic plan looks like a disaster for America’s economy. Biden wants to hike, corporate, personal, and investment taxes.
A President Biden would hike the corporate tax rate to 28% from today’s 21%.
He would lift the cap on Social Security taxes for those making over $400,000, both turning Social Security into a welfare program and raising the marginal tax rate a full 12.4 percentage points over time for everyone earning more than $138,000. Combined with his personal income tax rate hike to 39.6%, high-income Americans who already shoulder most of the tax burden would see their marginal tax rate rise to 52%. For those poor souls living in New York, the marginal tax rate would rise to more than 60%.
Dividend taxes, which are applied once on the corporate side and again on the personal side, would jump to a maximum rate of 43% at the federal level. Combined with the higher corporate income tax, almost $0.60 of every dollar earned by a company and paid out to shareholders would go to the federal government.
The capital gains tax is also going up under a President Biden. It doesn’t matter that higher capital gains rates don’t generate more tax revenue. And it doesn’t matter that capital is what is used to invest in new ventures that create jobs and economic prosperity. Biden wants to stick it to the “rich.”
The WSJ has more on Biden’s threat to American wealth and prosperity.
From Andrew Biggs:
Joe Biden promises not to raise taxes on Americans earning more than $400,000—but there’s a hitch. It lies in his proposal to apply the Social Security payroll tax to income above that amount.
Social Security is financed by a 12.4% levy on earnings up to $137,700. Although nearly every developed country caps its pension taxes, progressives grumble that the rich don’t pay enough. Mr. Biden’s Social Security plan, analyzed this month by the progressive-leaning Urban Institute, would retain the $137,700 payroll-tax ceiling but impose the 12.4% tax on earnings above $400,000.
This “doughnut hole” would spare the upper middle class from higher taxes. But only temporarily. With each passing year, the doughnut hole shrinks. The payroll-tax ceiling already increases annually with nominal wage growth. But Mr. Biden’s $400,000 threshold isn’t indexed. This means that over about three decades, the payroll-tax ceiling would be phased out.
But with time and wage growth, the Biden plan would raise the tax for employees earning above $137,700 by the same 12.4% of income. The Urban Institute analysis shows that over the long term, the tax increase on employees earning between $137,700 and $400,000 accounts for the majority of the plan’s new revenue. We can argue over the definition of “upper middle class,” but these people aren’t millionaires and billionaires.
The Editorial Board writes of Biden’s plans:
Mr. Biden is also proposing substantial increases in business tax rates that will raise the cost of capital. The former Vice President likes to say he’d only raise the top corporate tax rate to 28% from 21%. But so-called pass-through entities (often small businesses) employ more than 40 million Americans, and most pay taxes at the individual tax rate.
“Biden’s plan to raise personal income and payroll tax rates would push their federal rates from below 40 percent to, often, above 50 percent, and these are on top of state income taxes,” the authors write.
Mr. Biden would also raise capital costs by phasing down bonus depreciation in the 2017 tax reform, and he’d raise labor costs by imposing the 12.4% Social Security payroll tax to income above $400,000. The $400,000 threshold isn’t indexed for inflation so it would apply to ever-more Americans as the years go by.
And Richard Rubin discusses Biden’s plan to raise the corporate tax rate to 28%, writing:
Companies have incorporated the 21% rate into their planning and would have to adjust as Democratic plans move through Congress. Some investments that made sense at a 21% rate wouldn’t yield after-tax profits at higher rates or with steeper taxes on foreign income.
“As we look at investment choices, we’re using the current lower rate,” Jacqueline Crouse, vice president for tax at biotechnology company Amgen Inc., said at a February conference. She said Amgen considered the rate when it decided to build a facility in Rhode Island. A company representative didn’t comment when asked if planning had changed.
Kevin Conway, senior vice president for tax at AmerisourceBergen Corp., a pharmaceutical wholesaler, said at the same conference that the company uses current rates in long-range planning.
“I’ve made presentations to the board and talked about the potential for rate increases, and their response is, we’ll see,” he said then.
To partially offset the cost of the rate cut, Republicans limited deductions for business interest, curbed breaks for life insurers and scheduled tighter rules for deducting research expenses to begin in 2022. Those changes to broaden the tax base become more salient if the rate rises, and a 28% rate could leave some companies worse off than they were under the 35% rate. Life-insurance companies are already warning about the potential effect on their customers.
The corporate rate is the biggest revenue source in the Biden plan, generating more than $1 trillion of the $2.8 trillion net tax increase, according to the conservative American Enterprise Institute.