The tax proposals of Democratic presidential nominee Joe BidenJoe BidenMcConnell challenger dodges court packing question ‘Hamilton’ cast to reunite for Biden fundraiser Trump relishes return to large rallies following COVID-19 diagnosis MORE would raise $2.8 trillion over 10 years and reduce taxes for most households in the near-term, according to an analysis released Tuesday by the right-leaning American Enterprise Institute (AEI).
“Overall, Biden’s tax proposals would make the US tax code more progressive,” AEI researchers said in their paper.
Biden has offered a number of tax proposals aimed at raising taxes on wealthy individuals and corporations. These include undoing portions of President TrumpDonald John TrumpTwo ethics groups call on House to begin impeachment inquiry against Barr Trump relishes return to large rallies following COVID-19 diagnosis McGrath: McConnell ‘can’t get it done’ on COVID-19 relief MORE‘s 2017 tax-cut law that cut taxes for people making over $400,000, subjecting earnings over $400,000 to Social Security taxes, raising the corporate tax rate from 21 percent to 28 percent and changing how U.S. companies’ foreign profits are taxed.
Biden has also proposed expanding the earned income tax credit and reintroducing and expanding a tax credit for first-time homebuyers. In an effort to provide relief amid the coronavirus pandemic, Biden has proposed to temporarily expand the child tax credit.
AEI estimated that Biden’s plans would increase federal revenue by $2.8 trillion from 2021 to 2030, with most of the revenue gain coming from tax increases on businesses.
In 2021, Biden’s proposals would increase taxes for households in the top 5 percent of income but reduce taxes for those in other income groups, according to the analysis. Taxpayers in the top 1 percent of income would see their after-tax incomes reduced by 14.2 percent, while those in the bottom 10 percent would see their after-tax incomes increase by 11.3 percent. The sizable tax cut for low-income households “is primarily due to the large, temporary expansion of the child tax credit,” AEI said.
The think tank said that in 2030, after the child tax credit expansion expired, those in the top 1 percent of income would still see a sizable tax increase. However, households in other income groups would see small tax increases, with their after-tax incomes decreasing by between 0.1 percent and 2.1 percent.
“The modest tax increases for the bottom 95 percent of tax filers in 2030 are primarily attributable to business tax increases,” AEI wrote.
The Biden campaign in the past has argued that the experience with Trump’s tax law raises questions about the notion that part of the corporate tax ultimately is paid by workers.
AEI estimated that Biden’s proposed higher effective tax rates on wealthy individuals and businesses would reduce gross domestic product (GDP) in the short run when compared to the baseline, but that Biden’s plan would increase GDP in the medium-term because of a reduction in debt.
“In the long term, his plan would not raise enough to stabilize debt-to-GDP and would lead to a 0.18 percent smaller economy,” AEI said.