Who Gets Hit by Biden’s Tax Hike on Top Earners

By Yuval Rosenberg

Who Would Get Hit by Biden’s Tax Hike on Top Earners

President Biden has proposed raising the top individual income
tax rate, but he has also pledged that no one making under $400,000
would see their taxes go up. Now, the White House is clarifying
just who would be affected by Biden’s proposed tax hike.


Axios and
Bloomberg News report that Biden’s proposed
increase in the top tax rate from 37% to 39.6% would apply to
individuals making more than $452,700 in 2022 and married couples
with taxable income of at least $509,300, according to a White
House official. That means the higher top tax rate would apply to
less than 1% of taxpayers. Under the current
tax brackets for 2021, the top marginal rate of
27% applies to individuals making $523,601 or more and couples
earning $628,301 or more.

The spin: "The details mean the tipping point for an
individual is even higher than the $400,000 previously laid out,"
Bloomberg’s Josh Wingrove and Laura Davison write. But Axios notes
that the new details mean that Biden's promise not to raise taxes
on Americans making less than $400,000 only applies to individuals,
and that "two married individuals, who each have a taxable income
exceeding $255,000, would see the portion of their earnings above
that figure taxed at the highest rate."

That could add to the political challenges the president faces
in getting his proposals enacted, Axios’s Hans Nichols suggests,
"since some Democrats in high-income areas will have to explain to
voters who individually might make less than $400,000 that their
family could still be subject to Biden's tax hike."

Defying Biden, Some Congressional Democrats Still Seek to
Expand Medicare

President Biden didn’t include major health care reforms in his
new $1.8 trillion American Families Plan. Congressional Democrats
are planning to push for them anyway, The Washington Post’s Tony
Romm and Seung Min Kim
report.

The Democratic lawmakers are seeking to lower the Medicare
eligibility age to 55 or 60, expand the health services offered
under the program and allow the government to negotiate
prescription drug prices with pharmaceutical companies.

Biden’s latest plan includes $200 billion to extend increased
Affordable Care Act premium subsidies for people who buy their own
health insurance. A fact sheet released by the White House
emphasized that the president still supports letting Medicare
negotiate prices, lowering premiums and deductibles for those who
buy coverage on their own, lowering the Medicare eligibility age to
60 and creating a public option for health insurance — but most of
those large-scale reforms were left out of Biden’s latest plan,
despite pressure from dozens of Democratic lawmakers.

Why it matters: The continued pushes by congressional
Democrats for larger health care changes "threaten to create even
more political tension around a package that is already facing no
shortage of it," the Post’s Romm and Kim write. "The early efforts
reflect a broader belief among congressional Democrats that they
must more aggressively seize on their narrow but powerful
majorities to push policies that long have been stalled in
Washington — no matter their cost. … But health-care revisions are
likely to present a significant challenge, threatening to open
rifts not just between the two parties but within the Democratic
caucus itself. In an early sign of trouble, Sen. Joe Manchin III
(D-W.Va.) told The Washington Post on Wednesday that he opposes
expanding Medicare eligibility even as he supports broader
adjustments to the Affordable Care Act."

In Bipartisan Vote, Senate Approves $35 Billion for Water
Infrastructure

There are plenty of doubts about the ability of lawmakers to
work together on a bipartisan basis in today’s political climate,
especially when it comes to President Biden’s remarkably expansive
proposals on infrastructure and social welfare, but 89 senators
were able to agree on Thursday to support a bill to improve water
infrastructure in the U.S.

Just two senators voted against the $35 billion measure, which
would go toward existing programs that improve water quality, with
a special focus on rural areas.

Some lawmakers saw the agreement as a good sign. "The bottom
line is very simple: We are moving forward, wherever we can, in a
bipartisan way," said Senate Majority Leader Senator Chuck Schumer
(D-NY). "So let it be a signal to our Republican colleagues that
Senate Democrats want to work together on infrastructure, when and
where we can."

The problem supporters of bipartisanship face, though, is that
Biden’s plans are on an entirely different scale than the water
improvement bill and involve new programs and vastly higher levels
of spending. And in the wake of partisan bickering over Biden’s
plans, the desire to work on a bipartisan basis may be waning in
the White House. As Lisa Lerer and Annie Karni of The New York
Times
report Thursday, Biden appears to be undergoing a
change of heart as he embraces the idea of being a transformational
leader.

"Now 100 days into his presidency, Mr. Biden is driving
the biggest expansion of American government in decades, an effort
to use $6 trillion in federal spending to address social and
economic challenges at a scale not seen in a half-century," they
say. "Aides say he has come into his own as a party leader in ways
that his uneven political career didn’t always foretell, and that
he is undeterred by matters that used to bother him, like having no
Republican support for Democratic priorities."

US Economy Hits the Accelerator

Economic growth is picking up speed, with GDP expanding at a
rate of 1.6% in the first quarter of 2021, up from 1.1% in the
fourth quarter of 2020, the Bureau of Economic Analysis announced
Thursday. On an annualized basis, first quarter growth was a
vigorous 6.4%, compared to 4.3% the quarter before.

Spurred in part by Covid relief payments from the federal
government, a boom in consumer spending helped push economic output
to $19.1 trillion, close to its pre-pandemic level of nearly $19.3
trillion. Personal consumption rose at an annualized rate of 10.7%
during the first three months of the year, the second fastest clip
in 50 years, while spending on durable goods rose by 41.4%.

"Rising vaccinations, faster job growth and two rounds of
federal stimulus payments combined to supercharge household
spending," Bloomberg’s Reade Pickert
said.

Business investment and housing construction surged, too, at
rates of 9.9% and 10.8% respectively.

A separate report from the Labor Department showed that new
jobless claims extended a three-week downward trend, hitting a new
pandemic low. About 553,000 people applied for unemployment
benefits in state systems last week, and another 122,000 applied
through the temporary Pandemic Unemployment Assistance program,
bringing the total to 675,000.

More growth ahead: Economists are expecting to see even
higher growth in the second quarter. Experts polled by Bloomberg
predict a growth rate of 9.6% during the April through June period,
while others are projecting rates over 10%.

"We are seeing all the engines of the economy rev up," Gregory
Daco, chief economist at Oxford Economics, told the
Associated Press. "We have an improving health
environment, fiscal stimulus remains abundant and we are starting
to see rebounding employment."

Ian Shepherdson, chief economist at Pantheon Macroeconomics,

said the GDP report was likely the first in a
series. "It’s good news, but the better news is coming. There’s
nothing in this report that makes me think the economy won’t grow
at a gangbusters pace in the second and third quarter."

Shepherdson also said that he expects the recovery to rely
less on government spending moving forward: "This demonstrates the
value of government intervention when the economy is on its knees
from Covid. But in the coming quarters, the economy will be much
less dependent on stimulus as individuals use the savings they’ve
accumulated during the pandemic."

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