Most Americans would not see their tax bills change under President-elect Joe Biden’s budget and tax plans, according to a Penn Wharton Budget Model, a think tank housed at the Ivy League’s business school.
Instead, only the top 1%-5% of American income earners would pay more, Rich Prisinzano, director of policy analysis at PennWharton Budget Model, said in an online webinar Thursday.
“The minimum amount that you’d have to make to face any of these increases would be $400,000 in wages,” Prisinzano said.
The hit to the wealthy would be in the form of an additional 12.4% tax on households that already face the highest combined statutory federal, state, and local income and payroll tax rates, according to Penn Wharton’s analysis.
Lower-income Americans, by contrast, may see benefits through an expanded Earned Income Tax Credit, an expanded Child Tax Credit, and a proposal to institute free college for families that make less than $125,000 a year, Prisinzano said.
Between 2021 and 2030, Biden’s plan calls for raising $3.375 trillion in additional tax revenue and increasing spending by $5.37 trillion. By 2050, if adopted in its entirety, the Biden platform would cut federal debt by a total of 6.1% and increase GDP by 0.8% annually, the University of Pennsylvania research group found.
However, the economic recovery “will depend on fiscal response and availability of the vaccine over the next six months," Prisinzano said.
The resurgence of the coronavirus has led to “explosive” infections this fall, and “we will be stuck in this employment picture for a while,” he said on the webinar.
However, the chances of any Biden proposals becoming reality depend on which party controls the Senate.
If Republicans maintain a majority in the Senate, few of Biden’s proposed changes are likely to become law. Currently, the election outcome for Senate in Georgia is unknown, and a GOP win in January runoffs there would help keep a Republican Senate majority.
If Democrats win the Senate seats in Georgia, Biden’s package has a better chance, and “all my clients who make $400,000 or more would get hit hard. We’re all waiting on Georgia,” said Ryan Losi, CPA and shareholder at Piascik tax accounting firm.
Biden also wants to limit itemized deductions and increase the top income tax rate on long-term capital gains from 23.8% to 43.4% on taxpayers with income over $1 million annually. He favors returning the gift and estate tax annual exemptions to 2009 levels, roughly $3.5 million for individuals and $7 million for married couples. And he would raise the corporate tax rate from 21% to 28%.
“Should Republicans retain control of the Senate, however, the likelihood of major changes" to tax legislation would be unlikely, accounting firm CBIZ said in a note to clients.
Biden’s economic platform also calls for returning immigration to historical levels; expanding education and affordability from pre-K to college; investing in water, transit, clean energy, and other green projects; providing Social Security benefits for beneficiaries with low earnings histories; cutting drug prices; and ensuring paid leave up to 12 weeks for all workers.