Biden Plan Would Cut Taxes for Most, New Analysis Finds

Biden Plan Would Cut Taxes for Most, New Analysis Finds

iStockphoto/The Fiscal Times

Biden’s Build Back Better Plan Would Cut Taxes for Most Households: Analysis

A new analysis from the nonpartisan Tax Policy Center of the latest version of President Biden’s Build Back Better bill finds that it would provide a tax cut on average to most households in 2022 while increasing taxes on the top 1%.

The top 1% of households – those earning more than $885,000 – would pay roughly $55,000 more per year on average under the proposed changes to the tax code. Those in the top 0.1% ($4 million and higher) would pay about $585,000 more per year on average.

When all major tax provisions – which touch on a variety of areas such as health care coverage and excise taxes – are taken into account, about 20% to 30% of middle-income households would see a small tax increase in 2022, totaling less than $100 each. Higher-income households earning $200,000 to $500,000 would pay about $230 more.

Considering just direct taxes, less than 0.1% of households earning less than $500,000 would see a tax hike in 2022, though the picture changes in 2023, when some tax provisions expire and some kick in, resulting in many households seeing a tax increase relative to 2022. (TPC notes that “analyzing the House Democrats’ plan is especially complicated because the effective dates of its many tax provisions vary widely.”)

TPC also points out an odd quirk in the Democratic proposal related to the state and local tax (SALT) deduction. In its most recent iteration, the plan would raise the cap on the SALT deduction to $80,000 from 2021 to 2031, which would provide the majority of high-income households with an overall tax cut. Households earning between $500,000 and $1 million a year would end up getting a $6,130 tax cut on average in 2022, according to one TPC table, while those earning more than $1 million would receive a tax cut of $68,300.

“Thanks to the SALT Salt cap increase, over two-thirds of millionaires will get a TAX CUT under Build Back Better,” tweeted one outraged budget hawk in response to the analysis. Whether that tax provision makes it into the final bill remains to be seen.

The bottom line: “While the latest version of Biden’s signature initiative drops or revises many of his original proposals, it still reflects one key goal,” says TPC’s Howard Gleckman. “It would raise taxes on high income households and corporations while reducing, or at least not raising, taxes for the vast majority of low- and moderate-income households.”