How Much Will Biden Raise Taxes?
To pay for desperately needed infrastructure repairs and improvements, Biden needs to raise taxes
Even while President Biden is on the road selling his pandemic relief package to the American people, attention is already turning to his next big piece of legislation: infrastructure.
Estimates just to repair existing infrastructure run about $6 trillion, never mind the potential costs of expanding that infrastructure to meet the needs of our expanding population.
But even bigger than the infrastructure legislation is how to pay for it. Normally improvements to transportation infrastructure are paid for through the Highway Trust Fund which is funded by fuel taxes. More fuel efficient cars and trucks means fewer dollars in fuel taxes.
Will Biden instead raise taxes to cover the cost of his infrastructure package? Given that the $1.9 trillion relief package has already increased the deficit, it is likely that Biden will have to raise taxes to pay for a huge infrastructure package.
Oh dear. Do you hear those dogs baying? Those are the Orange One’s supporters who have been warning us about the huge tax hikes that Biden will pass to pay for his socialist programs.
Biden did campaign on raising taxes but only on people who earn more than $400,000. None of the Orange One’s supporters that I know make that kind of money. But that hasn’t stopped them from complaining. Loudly.
It amazes me how much they care about the rich who care nothing about them. Like the Orange One’s tax cuts that went mainly to his rich buddies. His supporters positively swooned over the magnanimity of His Orange Highness.
Never mind that they saw very little of that tax cut themselves and what little was cut was only temporary whereas the rich’s tax cuts were permanent.
But I digress.
Biden is contemplating raising the top tax rate from 37% to 39.6% for people earning $400,000 or more. On an income of $400,000, that’s a $10,400 increase. Not earth shattering but enough to make Republicans foam at the mouth.
Especially because it was their Orange lord and master who reduced the tax rate to 37% from its original 39.6%.
So Biden isn’t raising the tax so much as just reverting back to its pre-2017 levels.
Also being considered by Biden is increasing the corporate tax rate to 28% from its current post-Orange tax cut of 21%. Before the Orange One cut it to 21% it was 35%, so Biden’s proposed increase to 28% is still less than corporations were paying prior to 2017.
Yet, the Republicans assure us that 28% would be disastrous.
As would the idea of taxing capital gains as ordinary income for those earning more than $1 million per year. This income would be subject to that 39.6% cap which is why millionaires are in a lather about this. The current capital gains tax rate is 20% for those earning $469,051 or more.
And how many people would be affected by this increase? About 1% of the population. The population of the US was 331,000,000 in 2020 so that means that 3,310,000 taxpayers would be paying higher taxes on their capital gains.
And then there is the dreaded “death tax” also known as the estate tax. I have a friend who was in hysterics the last time raising it was discussed during the Obama administration. She was certain that she was going to be robbed of her inheritance.
Let me hasten to assure you (and her) that it only applies to estates with assets over $1 million. Admittedly I never asked her the size of the inheritance that she was expecting but having known her and her family for years, I’m confident that her inheritance was nowhere near that level.
Nevertheless, like all good Orange Man supporters, she was certain that the government was going to swoop in and make off with a huge chunk of what she thought that she deserved.
The proposal is to raise the estate tax from 40% to 45% on estates with assets over $1 million. In 2019, that was 1,900 estates. On $1 million that is about $50,000 more in tax. Not eye popping by any means.
More interesting to me is how the Democrats will get Biden’s wish list of tax increases past the Republicans. Grim Reaper McConnell is already saying “I don’t think there’s going to be any enthusiasm on our side for a tax increase.”
In fact, he claims that the infrastructure package will be a Trojan horse.
Across the board? Only if you earn more than $400,000. As Senate Minority Leader, McConnell earns $193,400 so he won’t be affected at all.