October 31, 2020

Biden’s tax proposals are sizable, relatively consistent, not radical | Articles

The nonpartisan Committee for a Responsible Budget figures that companies would pass along some of the burden of Biden’s higher corporate taxes to consumers, imposing cost increases ranging from 0.2% to 0.6% on most households at lower income thresholds.

RETHINKING SOCIAL SECURITY AND INVESTMENT TAXES

The most obvious philosophical changes in Biden’s plan come on payroll and investment taxes, significant slices of individuals’ tax burdens beyond income tax.

The existing 12.4% payroll tax, which is split between employers and workers and finances the Social Security program, applies only to the first $137,700 of a person’s income. That cap goes up annually with inflation. But it means high-earning professions — top salaried lawyers, physicians, business executives, for example — don’t pay Social Security taxes on wages beyond the threshold.

Biden proposes instituting the tax again beginning at $400,001 of income. The untaxed gap between the cap and $400,001 would close over time with the annual inflationary increases. That would eventually mean a Social Security system where all wage earners, regardless of their income and profession, paid the full freight of payroll taxes.

Biden applies a similar philosophy to investment income. Generally, current law taxes gains on longterm investments — those held for more than a year — and certain dividend income at capital gains rates that top out at 20%. That’s lower than the marginal income tax rates for many in the investor class.

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