Biden's new tax plan would push top individual income rate to highest in developed world
Biden unveiled new tax plan last week that targets wealthy Americans, corporations
Grover Norquist argues that the idea that this is only going to impact rich people is how the income tax was 'sold,' noting that 'all of these taxes are introduced and then moved right down to hit middle income Americans.'
The U.S. would have the highest personal income tax rate in the developed world under the newest White House proposal that would dramatically raise the rates paid by well-off Americans.
The budget blueprint that President Biden unveiled last week includes several tax hikes on the ultra-wealthy and corporations that would push the top U.S. rates on both individual and corporate income to the highest level in the developed world, according to a new analysis published by the nonpartisan Tax Foundation.
THESE STATES ROLLED BACK THEIR GASOLINE TAXES. OTHERS COULD FOLLOW
The Biden team's proposal would raise the average top tax rate on personal income to 57.4%, the steepest rate in the 38-member Organization for Economic Co-operation and Development.
President Biden addresses the 76th Session of the U.N. General Assembly on Sept. 21, 2021 in New York City. (Timothy A. Clary-Pool/Getty Images / Getty Images)
The president laid out a series of tax increases including a "Billionaire Minimum Income Tax" that would establish a 20% minimum tax on all U.S. households worth more than $100 million, or about 0.01% of Americans.
Under the proposal, the top sliver of U.S. households would be required to pay a tax rate of at least 20% on their full income, or the combination of wage income and whatever they made in unrealized gains. If a billionaire is not paying 20% on their income, they will owe a "top-up payment" that makes up the difference to meet the new minimum.
The White House projected that more than half the revenue generated by the tax would stem from the country's 700 billionaires.
Night falls at the Capitol in Washington, Thursday, Dec. 2, 2021, with the deadline to fund the government approaching. ( AP Photo/J. Scott Applewhite / AP Newsroom)
Biden also proposed raising the corporate tax rate to 28% from 21% as part of his budget request and pitched a global minimum tax that's designed to crack down on offshore tax havens. Arizona Sen. Kyrsten Sinema has previously said that she will not support a corporate tax increase.
On top of that, the top marginal tax rate on ordinary income is already scheduled to increase from 37% to 39.6% in 2026 when parts of Republicans' 2017 tax law expire. Biden's budget also assumes that his massive spending bill – the Build Back Better plan – becomes law.
That plan included a slew of tax hikes including a 5% surcharge on modified adjusted gross income (MAGI) above $10 million, plus a 3% charge on MAGI above $25 million, for a total increase of 8% – which is equivalent to about a 9.1% tax rate on taxable income, the analysis shows.
The Internal Revenue Service (IRS) headquarters in Washington, D.C., U.S., on Friday, Feb. 25, 2022. (Al Drago/Bloomberg via Getty Images / Getty Images)
The Build Back Better plan would also close provisions in the tax code that allow some wealthy taxpayers to avoid paying the 3.8% Medicare surtax on their earnings by strengthening a net investment income tax for anyone earning more than $400,000.
That means the top marginal tax rate on personal income at the federal level would rise as high as 51.4% in 2026, or roughly 52.5% on the basis of taxable income.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
That rate doesn't even factor in state income tax, which is paid by most Americans (just eight states do not tax income). The average top marginal state-local tax rate is about 6%, according to the Tax Foundation, which would mean the combined top tax rate on personal income would be around 57.4%. That's higher than any rate currently levied in a developed nation.
Japan and Demark are currently tied among OECD nations for the highest top income tax, with a rate of 55.9%. They're followed by France (55.4%), Austria (55%) and Greece (54%).
The U.S. currently has a top combined rate of 42.9%.