Your taxes are about to go up.
But it isn’t because Joe Biden was elected president.
Three years ago, almost to the day, when the Republican party held in the majority in both congressional chambers, Donald Trump signed into law the “Tax Cuts and Jobs Act,” a $1.5 trillion-dollar permanent tax cut to corporations and the wealthy.
It promised to “deliver more jobs, higher wages, and massive tax relief for American families and for American companies.”
What it accomplished, predictably, was slashing the corporate tax rate and encouraging businesses to put their additional capital toward paying off shareholders–not employees–to the tune of more than $700 billion.
Another time bomb set to detonate–conveniently right around the time the Biden/Harris administration is getting started–is a provision in the tax law to begin slowly increasing taxes on many low- and middle-income Americans.
Some will actually pay more than they did before the tax cut.
Those making $20,000 to $30,000 could owe an $365 next year just as we are struggling to hopefully lift ourselves out of the economic damage the coronavirus pandemic inflicted.
As Nobel Prize recipient, economist Joseph Stiglitz, explained in a New York Times op-ed at the end of October:
“President Trump and his congressional allies hoodwinked us. The law they passed initially lowered taxes for most Americans, but it built in automatic, stepped tax increases every two years that begin in 2021 and that by 2027 would affect nearly everyone but people at the top of the economic hierarchy. All taxpayer income groups with incomes of $75,000 and under — that’s about 65 percent of taxpayers—will face a higher tax rate in 2027 than in 2019. For most, in fact, it’s a delayed tax increase dressed up as a tax cut.”
Yet too many Americans won’t realize neither Biden nor the Democratic party had anything to do with it.
“For most, in fact, it’s a delayed tax increase dressed up as a tax cut. How many times have you heard Trump and his allies mention that? They surmised—correctly, so far—that if they waited to add the tax increases until after the 2020 election, few of the people most affected were likely to remember who was responsible.”
Joe Biden’s tax plan is substantially different.
“Mark Zandi and Bernard Yaros of Moody’s Analytics have done the most credible and thorough analysis comparing the Biden and Trump plans, including Mr. Trump’s stealth increases and other promised tax and expenditure changes. Mr. Biden’s plan wins by an enormous margin: 7.4 million more jobs and a much quicker recovery from this recession. That means higher wages and incomes for most Americans.”
According to Investopedia, Biden’s plan calls for:
- “The top individual federal income tax rate would rise from 37% to the pre-Trump rate of 39.6%.
- The corporate rate would rise from 21% to 28%; a 15% alternative minimum tax would apply to corporate book income of $100 million and higher.
- Individuals earning $400,000 or more would pay additional payroll taxes.
- The maximum Child and Dependent Tax Credit would rise from $3,000 to $8,000 ($16,000 for more than one dependent).
- Tax relief would be offered for student debt forgiveness and the first-time homebuyers credit would be restored.
- The estate tax exemption would drop by about 50%.”
If enacted, Biden’s plan would stimulate the economy far more than Trump’s since it intends to put more money in low- and middle-income Americans’ pockets.
Average Americans spend their money.
They spend it on groceries, home improvements, entertainment, pharmaceuticals, car purchases, rent and mortgages, clothing, education, holiday gifts.
They don’t buy back their stocks and reward their shareholders.
There is plenty about which to criticize Joe Biden, but to blame him for Donald Trump’s looming tax cut is misguided.
Preempting the hike is going to be a challenge, though, especially if Democrats fail to take the Senate majority.
Stiglitz concludes his piece with the warning:
“The problem now is that unless the Democrats win a majority in the House and the Senate and clinch the presidency, these Republican tax increases, already legislated, are likely to go into effect. The increases, unfairly aimed at the vast majority of Americans who are disproportionately suffering in the pandemic, will cause even more hardship.”
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