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Oct. 24, 2020

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Biden tax plans hit rich, will raise less money

His latest revision places more burden on top 1 percent

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WASHINGTON — Former Vice President Joe Biden’s tax proposals always were going to hit the wealthy the hardest. But revisions in recent months have shifted more of the burden onto the top 1 percent of income-earning households, according to new analyses from tax experts.

At the same time, estimates of the amount of new revenues raised by Biden proposals are declining because of the lagging economy and the possibility that a President Biden would have to delay his tax plans for a year until the economy gets on more solid footing.

While there are differences in the analyses of the two think tanks, the Urban-Brookings Tax Policy Center and the American Enterprise Institute, they both found that Biden’s proposals would generate “large net tax increases,” said Mark Mazur, TPC’s director.

“And both sets of estimates show those tax increases are largely borne by high-income households,” he said.

Biden’s plans would raise about $2.36 trillion over a decade, according to the new TPC figures; that’s down from $4 trillion in an analysis the group released in March. The AEI study found that Biden’s tax proposals would raise $2.86 trillion, down from nearly $3.85 trillion in the group’s earlier analysis.

The TPC found that if three dozen Biden proposals became law and went into effect in 2022, the top 1 percent of income-earning households would pay for the entire tax increase during that first year and then some. Meanwhile, the bottom 80 percent of income-earning households would get at least a modest tax cut. That differs from the center’s March estimate, when it found that all income groups would get at least a small tax increase.

The change is driven largely by a new Biden proposal for a temporary two-year boost to the child tax credit. Once that goes away and the tax cuts from the 2017 tax code overhaul expire at the end of 2025, the picture would change.

By 2030, the top 1 percent would be paying 73 percent of the new Biden taxes, while middle-income households would see their small tax cuts turn into small tax increases, the TPC said.

The AEI study published earlier this week had a similar take. By the end of the decade, the top 1 percent of income-earning households would be paying an additional $134,054 in 2030, picking up 74 percent of the costs of the Biden proposals. That’s up from a June analysis by AEI that found the top 1 percent would be paying for 66 percent of Biden’s proposals at the end of the decade.

While Biden’s provisions would make the tax code even more progressive than in earlier estimates, the dollar amounts have shrunk.

The largest part of the 41 percent decline that TPC estimates from its earlier analysis comes from an assumption that, if enacted, Biden’s proposals would be delayed until 2022.

Another $680 billion of the change comes from three big tax credits the center believes Biden would enact: the child tax credit boost, a new $15,000 tax credit for first-time homebuyers and a “Made in America” 10 percent tax credit for domestic manufacturing.

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