Biden prepping taxes on wealthy Americans as part of next spending bill

President Biden is reportedly preparing a slate of new tax hikes on wealthy Americans to pay for the second phase of his multitrillion-dollar spending plans.

The impending tax proposal, reported by Politico, will likely be more controversial than the suggested levies on corporations that Biden laid out last month to pay for the first part of his proposal, dubbed the American Jobs Plan. 

PELOSI OPENS DOOR TO LIFTING SALT TAX CAP IN BIDEN'S $2.25T SPENDING BILL

That measure – which has already drawn criticism from Republicans and centrist Democrats – would raise the corporate tax rate to 28% from 21% and impose a higher global minimum rate on U.S. businesses in order to pay for billions in new funding for roads and bridges, as well as transit systems, water infrastructure, hospitals and elder care. 

The next wave of tax proposals would help offset the cost of a spending package focused on investments in the so-called care economy, such as expanding health care, providing universal kindergarten, extending the child tax credit and offering paid family leave. The White House is expected to unveil the measure, which could cost upward of $1 trillion, sometime in April.

It's unclear exactly what the tax proposals will ultimately look like, but some currently under consideration include restoring the top marginal tax rate to 39.6%, where it sat before Republicans' 2017 tax overhaul, taxing capital gains as ordinary income above a certain threshold and eliminating the stepped-up basis at death, Politico reported, citing people familiar with the discussions. 

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Biden pledged on the campaign trail that he would not raise taxes on anyone earning less than $400,000, although the White House has been inconsistent in its messaging over whether the proposed threshold applies to both married couples and individuals. White House press secretary Jen Psaki indicated recently that an individual who earns $200,000 and is married to someone who makes the same amount could be affected by the tax increase, even though an individual who makes $200,000 and files separately would not.

The new set of proposals is sure to further inflame the legislative debate on Capitol Hill over taxes and whether to impose new levies on corporations and rich Americans.  

Potentially complicating Biden's plan is the fact that the tax hikes may disproportionately affect wealthy Democrats. Pre-pandemic IRS data shows that Democrats represent 65% of taxpayers with a household income of $500,000 or higher. 

At the same time, a growing number of lawmakers, including many Democrats from high-tax states like New York, New Jersey and California, are lobbying the Biden administration to include a full repeal of the Trump-era limit on state and local tax deductions in the American Jobs Plans.

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"This issue is so critical to our state and our constituents that we will reserve the right to oppose any tax legislation that does not include a full repeal of the SALT limitation," a 30-member group of House lawmakers said in a letter to congressional leaders last week.

The White House has said it welcomes feedback from lawmakers on how best to address infrastructure, which is broadly viewed as a bipartisan issue in Washington, but has remained cool to the idea of a SALT tax repeal, which would likely raise the price of the spending measure.

"It is not a revenue raiser and so it would add costs, and potentially significantly, to a package," White House press secretary Jen Psaki said. "There'd have to be a discussion about how that would be paid for what would be taken out instead. And then there's sort of a discussion of what's most important to achieving our overarching objectives."