Democratic presidential nominee Joe Biden’s tax proposals would boost federal revenue by $2.4 trillion over 10 years, substantially increase taxes on high-income households and reduce tax burdens for the lowest-income households, according to an analysis released Thursday by the Urban-Brookings Tax Policy Center (TPC).
The report is an update of an analysis TPC released in March, which had estimated that Biden’s plans would raise $4 trillion over a decade.
TPC said that their new revenue estimate is significantly lower for several reasons, including the fact that Biden has released several proposals since March to create and expand tax credits. The group also changed its estimates to assume that most of the proposals would be implemented in 2022 rather than 2021 because of uncertainties over the legislative environment due to the coronavirus pandemic.
Many of Biden’s tax proposals are focused on raising taxes on wealthy individuals and corporations. These include rolling back President Trump’s tax cuts for people with income of more than $400,000, subjecting earnings over $400,000 to Social Security taxes, taxing capital gains at the same rate as ordinary income for people with income above $1 million, expanding the estate tax, raising the corporate tax rate from 21 percent to 28 percent and creating a 15 percent minimum tax on companies’ income as it’s reported on financial statements.
Biden has also called for expanding and creating tax credits in order to provide relief for low- and middle-income taxpayers. These proposals include temporarily expanding the child tax credit, permanently expanding the child and dependent care tax credit and offering new tax credits for first-time home buyers, family caregivers and low-income renters.
TPC estimated that Biden’s plans would increase revenue by $2.4 trillion from 2021 through 2030, or 0.9 percent of gross domestic product during that period. About 60 percent of the revenue would come from tax increases on businesses, and about 40 percent would come from higher taxes on individuals and estates.
In 2022, when the expanded child tax credit would be in effect, taxpayers in the top fifth of income, who have income of above $159,800, would on average see higher tax burdens, while those in other income groups would on average see tax cuts. Those in the top 1 percent of income, who have income of more than $788,100, would see a reduction in their after-tax incomes of 15.9 percent, while those in the bottom fifth of income, who have income of less than $24,800, would see an increase in their after-tax income of 5.2 percent, TPC said.
In 2030, after the expansion of the child tax credit expires, the highest-income taxpayers would still see tax increases, and those in the bottom 40 percent of income would still see a reduction in their tax burden.
Taxpayers in the middle of the income distribution, who on average would get a tax cut in 2022, would see a small increase in their tax burdens in 2030. For example, those in the middle fifth of income, who have incomes between $55,7000 and $97,700, would on average see a decrease in their after-tax income of 0.1 percent.
“For middle-income households in 2030, the reduction in wages and investment income associated with the increased corporate income taxes would, on average, more than offset the effects of Biden’s expanded tax credits,” TPC said in its report.
TPC estimated that if the corporate tax provisions were excluded, only households in the top 10 percent of income, those with income of more than $248,900, would on average see increases in their tax burdens in 2030.
Biden has said he won’t raise taxes on people who make under $400,000. Gordon Mermin, one of the authors of the TPC report, said that “if the Biden statement is specifically referring to taxes directly levied on individuals … then the statement is almost entirely true.” But if that assertion is referring to the overall tax burden, then there will be “people affected in middle-income levels.”
The Biden campaign has questioned the idea that part of the corporate tax eventually falls on workers.
The Hill has requested a comment on the TPC report from the Biden campaign.
The release of the updated TPC report comes after the right-leaning American Enterprise Institute (AEI) released an estimate finding that Biden’s tax plans would raise $2.8 trillion from 2021 to 2030, using assumptions that the proposals would take effect in 2021.
Mark Mazur, director of TPC and a former Obama administration Treasury Department official, said that the analyses from TPC and AEI are “qualitatively similar,” because they both find that Biden’s proposals would raise a lot of revenue and that the tax increases would largely fall on high-income households.
President Trump has provided less specificity about his future tax plans than Biden has. Mazur said that TPC has been in touch with the Trump campaign and hopes to release an analysis of what is known about Trump’s plans in the near future.