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In fact, middle-income households could see an average tax cut of $ 680 and low-income households could see their tax bill go down by $ 760, according to an analysis from the Urban-Brookings Center for Tax Policy. Only the rich and corporations would see their tax bills increase under Biden’s proposals.
But even those plans will likely be dead on arrival if the Republicans win at least one of two second-round races in Georgia slated for Jan. 5 and retain control of the Senate. If Democrats reversed those two seats, the Senate would be split evenly, giving Vice President-elect Kamala Harris the deciding vote.
Even then, raising taxes on anyone could be a tough sell during a pandemic. Instead, Americans might see bipartisan support for tax changes that reduce the burden on some, like expanding the child tax credit or tax breaks for retirement savings. Versions of both are already enjoying the backing of lawmakers on both sides of the aisle and have been included in Biden’s sweeping plan.
Biden’s campaign plan would not raise individual taxes for anyone earning less than $ 400,000 a year, which is over 90% of taxpayers. But that would reverse the Republican-backed tax cuts in 2017 for those who earn more and increased corporate tax rate from 21% to 28%.
These tax hikes are expected to generate more than $ 2 trillion in revenue over 10 years, which would help fund some of Biden’s other plans to increase federal spending in areas such as education, health and social welfare. environment. Without tax increases on corporations and the wealthy, he might not be able to deal with some of these other items on the agenda.
The impending sunset
The Republican tax package included key provisions that end in 2025, meaning many people will see their taxes rise if Congress does not pass an extension – creating an impending headache for Biden’s second term or that who succeeds him.
In the short term, there would still be the question of how to pay the additional tax cuts to help groups suffering from the pandemic or the recession. It is possible that these provisions will be included in a pandemic-related stimulus bill and the cost will ultimately be added to the budget deficit. If not, they may need to be funded by some kind of tax hike.
Howard Gleckman, senior researcher at the Tax Policy Center, doesn’t rule out raising taxes on businesses – but not on individuals – to pay for some of these things even with a divided Congress. He sees a situation where the Democratic-controlled House sends a bill to the Senate with a tax cut for the average American family that could put Republicans in a bind.
“I think it would be difficult for Republicans to resist,” Gleckman said.
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