President Biden’s multibillion-dollar welfare bill breaks a key commitment from his 2020 campaign: that it would not raise taxes for people earning less than $ 400,000 a year.
A Joint Committee on Taxation analysis released Tuesday shows that Biden’s in-house version of the bill begins to raise taxes for middle-class families as early as 2023.
âThe analysis also documents that the administration’s commitment that ‘no one with an income below $ 400,000 will see their taxes increase’ is not true,â said Senator Mike Crapo of Idaho, the highest republican on the Senate finance committee.
Even after factoring in all credits, taxpayers earning between $ 50,000 and $ 75,000 per year would see a 0.3% tax increase starting in 2023. For those earning between $ 75,000 and $ 100,000 , the tax increase would be 2.9%.
Individuals earning between $ 100,000 and $ 200,000 would see a net tax hike of 7.4% in 2023.
“This analysis proves that any suggestion that this bill constitutes a general tax cut for the middle class is clearly false,” Crapo said.
By 2031, taxpayers between $ 50,000 and $ 75,000 would see a net increase of 1% in their taxes, while those between $ 75,000 and $ 100,000 would see a 2.9% increase. Meanwhile, those earning between $ 100,000 and $ 200,000 see an overall tax increase of 11.3%.
The tax increases Mr. Biden is supporting that will hit the less wealthy include a provision doubling the federal tobacco tax to over $ 2 a pack, new taxes on small business income and the closure of hundreds of various “loopholes” and deductions.
Tax authorities also say many of the tax increases formally intended for businesses, including a new 15% flat-rate tax on profits, will trickle down to lower income brackets.
The JCT results are bad news for the president and his welfare bill, which has stalled in Congress. It also breaks a key promise of Mr. Biden’s presidential candidacy for 2020.
During his campaign for the White House last year, Biden repeatedly stressed that he would not directly raise taxes for people earning less than $ 400,000. Instead, he asserted that the tax burden would be borne entirely by those who could most afford it: the rich.
“No one earning less than $ 400,000 would see their taxes increase,” Biden repeated earlier this year in an interview with CNBC. “Period. Bingo.
JCT’s analysis breaks this promise. What is more troubling is that Mr Biden’s tax hikes hit the lower and middle classes the most, while the very wealthy get a generous tax cut until at least 2025.
Reality stems from a proposal Democrats included in the bill to expand the National and Local Tax Deduction (SALT)
SALT allows individuals to write off a portion of their annual national and local taxes. The lucrative deduction is used by residents of predominantly Democratic coastal areas, where state and local tax burdens are particularly high.
The tax review signed by former President Donald Trump in 2017 capped the deduction at $ 10,000 per year. House Democrats included wording in Mr Biden’s welfare bill, raising the cap to $ 80,000.
The impact will disproportionately benefit high-income taxpayers, according to the JCT, while punishing those in the lower and middle classes.
For example, starting in 2023, people earning between $ 200,000 and $ 500,000 would benefit from a 12.7% tax reduction thanks to SALT. That same year, individuals earning between $ 500,000 and $ 1 million would see a tax cut of 35.5%.
The numbers do not increase until 2025, when individuals earning between $ 500,000 and $ 1 million see a net tax reduction of 46.4% due to SALT. However, people earning between $ 50,000 and $ 100,000 continue to face higher taxes overall.
Once the reinstatement of the SALT deduction expires in 2026, taxes increase dramatically on higher income levels.
Individuals earning between $ 100,000 and $ 200,000 would see their taxes increase by 16% that year. Meanwhile, those earning between $ 200,000 and $ 500,000 see an increase of 49.3%. By 2031, people in the latter bracket will see a 52.4% tax increase.
Despite the disproportionate benefits SALT has for the wealthy, Mr Biden will likely be unable to pass his welfare bill without his inclusion.
Nearly two dozen Democrats threatened to defeat the bill without an expansion of SALT. Given that Democrats have only a narrow three-seat majority in the House and the Senate is split 50-50, Mr Biden cannot afford any disunity with his party.
“No SALT, no dice,” said Rep. Josh Gottheimer, Democrat of New Jersey.