Biden’s tax plan: These 5 states would have the highest marginal tax rate

Biden Tax Calculator: How Might Your Taxes Change?

Biden’s tax plan: These 5 states would have the highest marginal tax rate

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President Joe Biden campaigned on a promise to raise taxes on wealthy Americans and corporations. His core tax proposals will increase taxes on people earning more than $400,000 per year and raise corporations’ tax rates from 21% to 28%.

And although his tax plan will impact the bottom line of the wealthiest of Americans, low- and middle-income households may benefit from increased tax credits. 

To understand how Biden’s presidency could impact your taxes, use our calculator to determine how much you might pay under his tax plan.

About your family

Calculator Methodology

This calculator’s primary purpose is to compare Biden’s key tax proposals with the current tax law to show expected tax changes.

It does not compare other income, deductions, or credits that are expected to remain unchanged even if Biden passes a new tax law.

This calculator and its inputs are information from the current tax law (the 2017 Tax Cuts and Job Acts), the 2020 projected tax brackets, and core key policies proposed by Biden as follows:

Biden’s key tax proposals

  • Increase tax rate from 37% to 39.6% for households earning $400,000 or more;
  • Child tax credit increase from $2,000 to $3,000 ($3,600 for those under the age 6);
  • Child and dependent care credit increase from $3,000 to $8,000 per dependent ($6,000 to $16,000 for multiple dependents); and
  • Cap itemized deductions to 28% for households earning more than $400,000.

Limitations of this calculator

  1. The estimated taxes or projected refunds do not consider the earned income tax credit (EITC), additional Medicare taxes assessed on high-income earners, capital gain taxes, or self-employment taxes that may impact your tax situation.
  2. The child and dependent care credit do not consider dependents and spouses who are physically or mentally incapable of self-care over 13 years of age.
  3. We modified the 2020 tax brackets to reflect Biden’s tax proposals. For single and head of household taxpayers, we adjusted the 35% tax bracket to reflect upper-income limits of $400,000. For married couples filing jointly, we adjusted the 32% and 35% tax brackets to reflect the upper-income limits of $400,000. For all taxpayers, we replaced the 37% with Biden’s proposed tax increase of 39.6% for incomes over $400,000.

Источник: https://www.forbes.com/advisor/taxes/president-biden-tax-calculator/

Tax Proposals of President-Elect Biden and Other Prominent Democrats

Biden’s tax plan: These 5 states would have the highest marginal tax rate

Wednesday, January 13, 2021

This blog summarizes some of the tax proposals of President-elect Joe Biden and other prominent Democrats.

Increased Individual Tax Rate

Biden would increase the top marginal income tax rate for individual taxpayers with income above $400,000 from 37% to 39.6% (the top marginal income tax rate in effect prior to the enactment of the Tax Cuts and Jobs Act (the “TCJA”)).[1]  For income subject to the additional 3.8% tax on net investment income, the rate would be 43.4%.

Increased Capital Gains Tax Rate

Biden would increase the long-term capital gains and qualified dividend rate for individual taxpayers with income in excess of $1 million from 20% to the proposed ordinary income tax rate of 39.6%.[2]  It is unclear whether the 39.6% rate would include the additional 3.8% tax on net investment income; if it did not, the marginal rate for capital gains could be as high as 43.4%.

Repeal the $10,000 Cap on the State and Local Tax Deduction

Biden would repeal the $10,000 cap on the state and local tax deduction.  However, for taxpayers with income of more than $400,000, the 28% cap on the benefit of deductions and the restoration of the Pease limitation (both described below) will reduce the benefit of the repeal.[3]

Death as Realization Event

Under current law, the death of a taxpayer is not a taxable event.  The basis of property acquired from a decedent is stepped-up to the fair market value at death, with the result that appreciation in the property during the life of the decedent is not subject to income tax.  Biden would treat death as a realization event.

[4]  As a result, the decedent would be treated as if he or she sold all of his or her assets for fair market value at death and would be taxed on any unrealized appreciation at the rate applicable to long-term capital gains (which, in the case of taxpayers with income above $1 million, would be the ordinary income tax rate of 39.6%).

Limitations on Itemized Deductions

Biden would cap the tax benefit of itemized deductions at 28% of value for taxpayers with income above $400,000.[5]

Biden would also restore the “Pease” limitation on itemized deductions.  The Pease limitation would reduce the value of certain itemized deductions by 3% for every dollar of a taxpayer’s taxable income above $400,000, with a maximum reduction equal to 80% of the total value of the taxpayer’s itemized deductions.

For a taxpayer with itemized deductions, the 28% cap on the tax benefit of itemized deductions and the Pease limitation reduce the value of a taxpayer’s deductions – and increases his or her taxes – by 12.44% of the amount of the deductions.[6]

Phase Passthrough Deduction

Section 199A provides individuals (and certain trusts and estates) with a “passthrough deduction” of up to 20% that reduces the income tax rate from 37% to 29.6% for ordinary income items from certain passthrough entities, such as partnerships, S corporations, REITs, trusts and estates.  Biden would phase out this deduction for taxpayers with taxable income above $400,000.[7]

Payroll Tax

Biden would impose the 12.4% social security payroll tax on taxpayers with earnings above $400,000.[8]  Under current law, wages above $142,800 (for 2021) are not subject to the 12.4% social security tax.  Biden would keep the existing threshold, so that wages between $142,800 and $400,000 would not be subject to the payroll tax.

 However, because the existing cap of $142,800 is adjusted over time for wage growth and the $400,000 threshold is fixed, the gap would gradually close so that all wages would eventually be subject to the 12.4% social security tax.  For an employee, the payroll tax is split evenly between the employer and the employee.

 Self-employed taxpayers with earnings above $400,000 would be required to pay the full 12.4% social security payroll tax.

Increased Corporate Tax Rate

Biden would increase the corporate income tax rate from 21% to 28%.[9]

Corporate Minimum Tax

Biden would introduce a new 15% minimum tax on book income of companies that report net income of more than $100 million.  Corporations would pay the higher of the regular corporate income tax or the 15% minimum tax.  The minimum tax would still permit corporate taxpayers to use foreign tax credits and any net operating loss carryovers.

Changes to GILTI

Biden would double the current effective tax rate on “global intangible low-taxed income” (“GILTI”) from 10.5% to 21% (and from 13.125% to 26.250% starting in 2026).

In addition, Biden would calculate GILTI tax liability on a country-by-country basis, rather than a global basis, and thereby deny taxpayers the ability to blend high-taxed foreign income with low-taxed foreign income.  Under current law, the GILTI tax exempts earnings up to a 10% deemed return on “qualified business asset investment.”  Biden would eliminate the exemption.

Offshoring Tax Penalty and Made in America Tax Credit

Biden would establish a 10% penalty surtax on companies that offshore manufacturing and service jobs to foreign countries to sell goods or provide services back to the U.S. market.  Companies would also be denied deductions for expenses related to moving jobs and production overseas if these could be performed in the United States.

 Biden would also offer a “Made in America” tax credit, which would be a 10% advanceable tax credit for companies making investments that create jobs for U.S.

workers and accelerate economic recovery by revitalizing existing closed or closing facilities, retooling or expanding facilities to advance manufacturing employment, or expand manufacturing payroll.

Repeal of -Kind Exchanges

Biden would repeal section 1031, which allows taxpayers to exchange “-kind” real estate tax-free.[10]

Estate and Gift Tax

Under current law, the estate and lifetime gift exemptions for 2021 are both $11.7 million (increased from $11.58 million in 2020) and the maximum estate and gift tax rates are both 40% (applicable to taxable amounts above $1 million).

 Biden would reduce the exemptions to $3.5 million for the estate tax exemption and $1 million for the lifetime gift tax exemption and would increase the maximum estate and gift tax rates to 45%.

 This would restore the exemptions and rates to 2009 levels.[11]

Other Proposals

Biden also proposes to expand the new markets tax credit and several renewable-energy-related tax credits, and establish new credits for businesses that experience workforce layoffs or major government institution closure.[12]  He has also proposed replacing the deduction for contributions to retirement savings plans with a 26% credit.[13]

Biden also has proposed expanding the earned income tax credit, the child and dependent care tax credit, and the child tax credit and reintroducing the first-time homebuyers’ tax credit.[14]

Wyden’s Proposal

Sen.

Ron Wyden (D-OR) has proposed a “mark-to-market” tax on wealthy and high-income individuals that would tax unrealized gains in publicly-traded property and would impose an additional tax in the nature of an interest charge upon the sale of nontraded property.[15]  The proposal would also increase the capital gains tax rate so that it is equal to the ordinary income tax rate for these taxpayers.

Wyden’s mark-to-market proposal would apply to individuals, estates or trusts with income in excess of $1 million or assets exceeding $10 million in each of the three prior tax years.

[16]  For purposes of determining whether the $10 million asset test is satisfied, the first $2 million of combined value of a taxpayer’s primary and secondary personal residences would be excluded, the value of a taxpayer’s operating family farm would be included only to the extent it exceeds $5 million, and the first $3 million of a taxpayer’s retirement savings would excluded.

These taxpayers would be required to “mark-to-market” their publicly-traded assets on an annual basis and pay a tax on any appreciation (or take a loss on any depreciation) at the end of the tax year as if they had been sold.

In addition, a “look-back charge” in the nature of an interest charge would be imposed on gains from non-publicly traded assets closely-held businesses, investment real estate, and art and collectibles, upon a realization event, which would generally include any transfers of these types of property or the death of the owner.

 Proceeds from the primary and secondary residences of a taxpayer only in excess of $2 million, and proceeds from a family farm only in excess of $5 million, would be subject to the look-back charge rule.

 Wyden’s proposal would not apply to assets held in tax-preferred savings accounts, which would continue to be taxed in the same manner as under current law.

Wyden’s proposal would also include transition rules that would require taxpayers to pay tax on pre-proposal built-in gains over an unspecified period.

Publicly-traded corporations would generally not be subject to Wyden’s proposal, but there would be anti-abuse rules that would prevent taxpayers from using a corporation to avoid application of the mark-to-market rules.  The Wyden proposal would apply the regime at the partner or S corporation shareholder level, and an interest in a partnership or S corporation would generally be treated as a nontraded asset.

Ocasio-Cortez’s and Schakowsky’s Proposal

Rep. Alexandria Ocasio-Cortez (D-NY) and Rep.

Jan Schakowsky (D-IL) previously indicated that they plan to introduce a bill that would implement a mark-to-market system and increase the capital gains tax rate to match ordinary income tax rates.

[17]  Ocasio-Cortez’s and Schakowsky’s bill would also increase the top marginal individual income tax rate to 59%.  The details of the proposal have not yet been released.

Financial Transaction Taxes

There have been several proposals to impose a financial transactions tax on trades of stocks, bonds, and derivatives.  The Wall Street Tax Act of 2019, sponsored by Sen. Brian Schatz (D-HI) and Rep. Peter DeFazio (D-OR), would to impose a 0.1% a tax on securities transactions.[18]  Sen.

Bernie Sanders (I-VT) and Sen. Kirsten Gillibrand (D-NY) previously introduced a bill that would apply tax of 0.5% for stocks, 0.1% for bonds and 0.

005% for derivatives and would provide an income tax credit to offset the financial transaction tax for taxpayers with income of less than $50,000 (or $75,000 for couples).[19] [1] See Biden, “A Tale of Two Tax Policies: Trump Rewards Wealth, Biden Rewards Work,” Biden Harris.

[2] See id.; Biden, “Healthcare,” Biden Harris. [3] This proposal does not appear on the Biden website but has been widely reported. See e.g., Richard Rubin, “How Joe Biden’s Tax Plan Could Affect You,” The Wall Street Journal. [4] See Biden, “Healthcare.”  While his website only states that his capital gains proposals “will close the loopholes that allow the super wealthy to avoid taxes on capital gains altogether,” Biden has confirmed during campaign events that this means treating death as a realization event.  See Rubin, “How Joe Biden’s Tax Plan Could Affect You.” [5] These proposals do not appear on the Biden website but have been widely reported.  See e.g., Tony Nitti & Charlie Forsyth, “U.S. Taxation in 2020: Tax Policy & the Presidential Election,” Bloomberg Tax (Nov. 2, 2020) [6] 39.6% – 28% + (3% * 28%). [7] This proposal does not appear on the Biden website but has been widely reported.  See e.g., Rubin, “How Joe Biden’s Tax Plan Could Affect You.” [8] This proposal does not appear on the Biden website but has been widely reported.  See e.g., id. [9] The proposals in this section appear in Biden, “The Biden-Harris Plan to Fight for Workers by Delivering on Buy America and Make It in America,” Biden Harris. [10] See Biden, “Caregiving,” Biden Harris.

 Although the plan does not specifically mention -kind exchanges under section 1031, according to Bloomberg News, a Biden campaign official has said that “a Biden administration would take aim at so-called -kind exchanges, which allow investors to defer paying taxes on the sale of real estate if the capital gains are reinvested in another property.  The official also said they would prevent investors from using real-estate losses to lower their income tax bills.”  Tyler Pager, “Biden’s $775 Billion ‘Caring Economy’ Plan Paid for with Real Estate Taxes,” Bloomberg (July 21, 2020).

[11] See Biden, “Highlights of Joe Biden’s Plans to Support Women During the COVID-19 Crisis,” Biden Harris; Biden-Sanders Unity Task Force, “Combating the Climate Crisis and Pursuing Environmental Justice,” Biden Harris. [12] These proposals appear in Biden, “The Biden-Harris Plan to Fight for Workers by Delivering on Buy America and Make It in America.” [13] Biden, “Older Americans,” Biden Harris.https://joebiden.com/older-americans/ [14] See Biden, “A Tale of Two Tax Policies: Trump Rewards Wealth, Biden Rewards Work,” Joe Biden, “Housing,” Biden Harris  The expansion of the earned income tax credit does not appear on the Biden website but has been widely reported.  See e.g., Kaustuv Basu, “Biden Tax Credit Proposals Could Gain Traction in Split Congress,” Bloomberg Tax, (Nov. 12, 2020). [15] See Ron Wyden (R-OR), Senate Fin. Comm., Treat Wealth Wages (Sept. 2019). [16] These thresholds would apply to both single and joint filers and would be indexed for inflation.  A taxpayer with income or assets that exceed either of the thresholds would be subject to the regime until the taxpayer fails to meet both income and asset requirements for three consecutive tax years, at which point the taxpayer could elect anti-deferral accounting. [17] Laura Davison, “Alexandria Ocasio-Cortez Plans Bill to Boost Top Individual Tax Rate to 59%,” Bloomberg, (Nov. 15, 2019). [18] Wall Street Tax Act of 2019, H.R. 1516, 116th Cong. (2019). [19] See Inclusive Prosperity Act of 2019, S. 1587, 116th Cong. (2019).

© 2020 Proskauer Rose LLP. National Law Review, Volume XI, Number 13

Источник: https://www.natlawreview.com/article/tax-proposals-president-elect-biden-and-other-prominent-democrats

Fact check: Biden tax plan would raise rates for those who make more than $400K, corporations

Biden’s tax plan: These 5 states would have the highest marginal tax rate
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Former vice president Joe Biden accepts the Democratic Party nomination for the 2020 presidential election, Biden outlined four crises facing America USA TODAY

Viral posts on claim tax rates for some families would more than double if Democrat Joe Biden is elected president.

“Bidens tax rate on a family making 75000 dollars would go from 12% to 25%,” reads a post Aug. 16 that has been shared more than 126,000 times. “LET THAT SINK IN ALL YOU RIDING WITH BIDEN SUPPORTERS.”

Other users shared similar versions of the plain text meme that gained hundreds of shares. The claim made its way to .

Fact or fiction: We'll fact check the news and send updates right to your inbox. Sign up to get them here.

Another meme centered on the proposed tax policies of Biden's running mate, Sen. Kamala Harris, D-Calif., made the rounds on this month. A post Aug. 23 to Aaron Hughes' page that went viral features a screenshot from a Fox Business Network segment of Harris' proposed economic policies, pitched during her campaign for president.

Above the screenshot is a statement addressing Harris' suggested income tax increase to 39.6% for top earners.

“Say your bi-weekly gross salary is $3,000 you are giving these sad sacks 39.6% which is $1,188. Nearly HALF YOUR PAYCHECK!!! Forget feeding your family after you've paid all your bills! Are you REALLY okay with this???” the statement reads.

The meme was posted to the page for Project Republic later the same day. Project Republic is a media company that supports President Donald Trump, according to its bio.

USA TODAY reached out to the users for comment. Hughes did not offer additional information about his post in a response.

Taxes would not double, analyses show

A federal tax rate of 12% applies to families that make up to $80,250 or individuals who make up to $40,125, according to the Internal Revenue Service. Although posts claim this rate would increase, tax rates for families earning $75,000 annually would stay the same under Biden's plan.

Garrett Watson, senior policy analyst at the Tax Foundation, told USA TODAY via email that the claim uses the 12% income tax bracket under current law, which ranges from $19,750-$80,250 in taxable income for those filing jointly.

The posts claim the tax rate would return to where it was before the Tax Cuts and Jobs Act, which was 25% for joint filers who earned $75,900 to $153,100 in taxable income for 2017, Watson said. 

“Biden has stated that he would repeal the individual tax cuts for those earning $400,000,” Watson said. “While he has not explicitly stated that he would support extending the remaining TCJA rates, when they expire at the end of 2025, it is incorrect to say that raising those rates is part of his tax proposals at this time.”

Watson said that even if Biden's proposal included a full repeal of TCJA rates, the claims wouldn't be right. 

“A joint filer earning $75,000 in taxable income would be in the 15% tax bracket, not the 25% bracket. For single individuals earning $75K, full TCJA repeal would mean going from a 22% top marginal tax rate now to a 25% rate,” Watson said. 

A single taxpayer making $3,000 every two weeks – as described in the Harris claim – earns $78,000 a year. People in this income bracket would not give up “half their paychecks” under the Democrats' proposed tax plan.

Biden's plan raises taxes for high-income individuals, corporations

Similar analyses of Biden's tax plan note that corporate tax rates would increase.

“Biden would raise the corporate tax rate from 21 to 28 percent,” the Committee for a Responsible Federal Budget estimated, and his tax plan would raise somewhere between $3.35 trillion to $3.67 trillion over a decade if enacted in full starting in 2021.

information released by the Biden campaign and conversations with its staff, the Tax Policy Center found that “high-income taxpayers would face increased income and payroll taxes.” 

The top tax rate is 37% for individual single taxpayers with incomes greater than $518,400 and $622,050 for married couples filing jointly, according to the IRS.

The Tax Foundation and the Committee for a Responsible Federal Budget said Harris and Biden proposed raising the top marginal income tax rate to 39.6%.

The screenshot from Fox Business Network accurately says Harris proposed raising the corporate income tax rate from 21% to 35% and imposing a 0.2% financial tax rate on stock trades and a 0.1% rate on bond trades as a candidate, according to the Tax Foundation. 

Details about the “4% extra tax on $100K+ households” were not included. Per The Tax Foundation, Harris floated a 4% income-based insurance premium on households making more than $100,000 a year to fund her “Medicare for All” plan.

The former vice president has said a tax increase for those making less than $400,000 is not a part of his plan.

In a joint interview with Harris, Biden told ABC News, “I will raise taxes for anybody making over $400,000,” and anyone making less than that would face “no new taxes.” 

In an interview with CNBC in May, Biden said, “Nobody making under 400,000 bucks will have their tax raised. Period.” 

The Washington Post reported in May on Biden's announcement that he is firm on not raising taxes on the middle class.

The Biden campaign could not be reached for comment. Campaign spokesman Michael Gwin told Reuters that Biden has made clear that no one making less than $400,00 would see their taxes raised. 

“Moreover, Biden will give millions of middle-class families a tax cut through new refundable credits that lower the cost of health insurance, help first-time homebuyers buy a house and assist working families to pay for child care,” Gwin said.

Our ruling: False

This claim is FALSE, our research. Biden said he will not raise taxes on anyone making less than $400,000 a year. A taxpayer making $75,000, or making $3,000 biweekly, would not move to a higher tax bracket, as claimed. Analysts concluded that Biden's tax plan would apply to wealthy individuals and corporations. 

Our fact-check sources: 

  • Internal Revenue Service: IRS provides tax inflation adjustments for tax year 2020
  • Tax Foundation, Nov.

    14: 2019, 2020 Tax Brackets

  • Tax Foundation Fiscal Fact: November 2016, 2017 Tax Brackets
  • Garrett Watson: Email statement to USA TODAY
  • Committee for a Responsible Federal Budget, July 30: Understanding Joe Biden's 2020 Tax Plan
  • Tax Policy Center, March 5: An Analysis of Former Vice President Biden’s Tax Proposals
  • CNBC Transcript, May 22: Former Vice President Joe Biden Speaks with CNBC’s “Squawk Box” Today
  • The Washington Post, May 22: Joe Biden says he won’t raise taxes on anyone making under $400,000
  • Reuters, Aug. 19, Fact check: Joe Biden has not proposed a tax hike on families making $75,000 a year
  • Internal Revenue Service, Nov. 6, 2019: “IRS provides tax inflation adjustments for tax year 2020”
  • The Tax Foundation, Aug. 12, 2020: “Where Does Kamala Harris Stand on Tax Policy?”
  • ABC News, Aug. 23: Biden to ABC's David Muir on raising taxes: 'No new taxes' for anyone making less than $400,000

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