Vice President Kamala Harris has thrown her support behind President Biden’s proposed tax increases, outlined in his recent budget plan for 2025¹. This endorsement aligns with the administration’s broader efforts to reform the tax system and generate additional revenue to fund various initiatives.
Here’s how the new tax plan would work.
The Main Tax Increases Proposed By Biden
President Biden’s tax plan ¹ is designed to increase tax revenue while promoting fairness across the board. Let’s break down the key proposals that the administration has put forward.
First on the list is a proposed increase in the corporate tax rate. The plan would raise this rate to 28%, a move that targets large businesses and their profit margins. This is still lower than the pre-2017 tax law rate of 35%, but it’s a significant step up from the current 21%.
On top of that, the President proposes raising the corporate minimum tax rate on billion-dollar corporations from 15% to 21%, ensuring that these companies pay more of their fair share, even if they exploit other tax breaks.
Next, Biden is targeting the ultra-wealthy with a 25% minimum tax on individuals whose wealth exceeds $100 million. This aims to address the glaring inequity where many billionaires currently pay a lower tax rate on their total income than middle-class workers do. This measure is squarely focused on the top 0.01% of Americans, ensuring they contribute more fairly to the nation’s tax base.
In a bold move to curb stock buybacks, which have been criticized for prioritizing shareholders over workers, the President proposes quadrupling the tax on stock buybacks from 1% to 4%. This could potentially redirect corporate funds toward investments in workers and infrastructure, aligning with broader economic goals.
The plan also includes the elimination of tax subsidies for oil and gas companies. This aligns with the administration’s climate agenda, encouraging a shift away from fossil fuels and promoting cleaner energy alternatives.
Real estate investors are also on Biden’s radar, with a proposal to close the “like-kind exchange” loophole. This loophole has allowed property investors to defer paying capital gains taxes when they exchange properties, a benefit that’s been criticized as disproportionately favoring the wealthy.
Most people selling their primary residence would not pay capital gains taxes unless their profit exceeds $250,000 (single) or $500,000 (married).
But the plan doesn’t stop there. It also proposes denying tax deductions for any compensation over $1 million per employee in C corporations, a move aimed at curbing the skyrocketing executive pay that has far outpaced the wages of ordinary workers. The idea is to level the playing field and discourage excessive pay packages that have little to do with company performance.
Another key component is ending the preferential tax rates on capital gains and dividends for households making over $1 million. Under this proposal, the wealthiest Americans would pay the same 39.6% marginal tax rate on their investment income as high-earning workers do on their wages, eliminating one of the most significant disparities in the current tax system.
Finally, the plan ensures that the IRS has the resources it needs to enforce these tax rules effectively. The President is committed to restoring full funding for the IRS, as outlined in the Inflation Reduction Act, to crack down on wealthy tax cheats and improve services for regular taxpayers. Already, the IRS has made strides, recovering hundreds of millions in unpaid taxes from delinquent millionaires and tightening the net around those who evade their tax obligations.
In a nut shell, Biden’s tax plan that Harris is backing is comprehensive, aiming not only to raise revenue but to address long-standing inequities in the tax system. By targeting large corporations, the ultra-wealthy, and specific tax loopholes, the administration seeks to create a fairer system where everyone pays their fair share.
How Much Additional Revenue is Expected from These Tax Increases?
The proposed tax increases are projected to have a substantial impact on federal revenue.
According to estimates, the gross tax hike could exceed $5.1 trillion. However, after accounting for various credits and deductions, the net increase is expected to be around $3.4 trillion.
This additional revenue is intended to fund various government programs and initiatives while also addressing the federal deficit.
It’s important to note that these figures are estimates and the actual impact may vary depending on economic conditions and how the proposals are implemented.
What Aspects of Biden’s Tax Plan Does Harris Specifically Endorse?
Vice President Harris has expressed strong support for the overall tax increases proposed in Biden’s budget. Her endorsement aligns with the administration’s goal of making wealthy individuals and corporations pay their “fair share” in taxes.
Harris’s backing of the plan reinforces the unified front presented by the administration on tax policy. She has emphasized the importance of these measures in funding critical programs and addressing income inequality.
Additional Tax Measures
While Harris primarily supports Biden’s proposals, she has also advocated for some additional tax measures. These include:
- A special exemption for workers who receive tips, potentially benefiting those in the service industry(ref)
- An enhanced child tax credit beyond 2025, extending support for families with children(ref)
These proposals complement the broader tax plan and focus on providing relief to working families and individuals in specific circumstances.
Projected Economic Effects of These Tax Increases
The proposed tax increases are expected to have significant economic implications. Some projections(ref) suggest:
- A 1.6% reduction in long-run GDP
- A 2.7% decrease in capital stock
- A 1.1% reduction in wages
- A potential loss of 666,000 full-time equivalent jobs
Remember that these projections are based on economic models and assumptions, and the actual impact may differ. Supporters of the plan argue that the benefits of increased government spending and reduced inequality could offset some of these potential negative effects.
How Will These Changes Affect Different Income Groups?
The tax plan aims to target high-income earners and large corporations while protecting lower and middle-income Americans. According to the administration, there will be no new taxes for individuals earning less than $400,000 per year(ref).
High-income earners and large corporations are expected to bear the brunt of the increased tax burden. However, the plan also includes potential benefits for working families through tax cuts and credits, such as the enhanced child tax credit and the Earned Income Tax Credit (EITC).
Main Criticisms
Critics of the tax plan have raised several concerns. Some argue that higher taxes could reduce economic competitiveness, potentially discouraging investment and job creation. There are worries that increased corporate taxes might lead to companies relocating operations overseas or passing costs on to consumers.
Others contend that the proposed wealth tax might be challenging to implement and could face legal challenges. Critics also argue that higher taxes on corporations and the wealthy could stifle innovation and entrepreneurship.
What Other Tax-related Measures are Included in Biden’s Budget?
Beyond the headline tax increases, Biden’s budget includes several other tax-related measures:
- Extension of Affordable Care Act premium tax credits, making healthcare more affordable for many Americans
- Expansion of the Earned Income Tax Credit (EITC), providing additional support for low to moderate-income workers
- Additional funding for IRS enforcement and taxpayer services, aimed at improving tax collection and reducing the tax gap
These measures, combined with the proposed tax increases, form a comprehensive approach to tax reform that aims to generate revenue, support working families, and address perceived inequities in the current tax system.
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Davin is a jack-of-all-trades but has professional training and experience in various home and garden subjects. He leans on other experts when needed and edits and fact-checks all articles.