Democrat candidate Joe Biden has repeatedly pledged that he will “absolutely” not raise taxes on any American who earns less than $400,000. However, policy analyst Taylor LaJoie at the Tax Foundation, observed, “We and other analysts across the political spectrum concluded that the tax increases proposed by the Biden-Harris campaign…would to some extent fall on the middle class.”
LeJoie points out that there is a huge difference between who writes the check to the IRS “and who ultimately bears the economic burden of the tax.” When Joe Biden continually claims that he will only raise taxes on earners whose incomes are over $400,000, the implication is that his tax plan will target only those taxpayers.
But deeper economic analysis tracks Biden tax increases downstream and beyond the wealthy person or corporation writing the check. In fact, as one economist points out “it is simply not economically possible to segregate the impacts (of taxes) on the high-income from everyone else.”
A raise in the corporate and business tax can mean lower pay for employees across the board. For example, the American Enterprise Institute found that a mere one percent increase in the corporate tax rate correlates to a 0.5% decline in real wages. Also, in 2007, the nonpartisan Congressional Budget Office provided a more damaging perspective: workers carry the burden of corporate taxes and typically bear 70% of those costs.
Then there are the under-reported changes the Biden tax plan that could result in higher direct tax increases for everyone. The Biden plan does away with deductible traditional contributions for retirement plans—401(k)s, IRAs, and others.
While details at this point are ambiguous, they involve taxing income twice. Only after-tax contributions can be stashed away in retirement accounts. When the funds are later withdrawn, they are taxed again.
The plan tries to offset the double taxation with a refundable tax credit for each dollar contributed. The scheme would also lower the tax benefit of most traditional retirement accounts for people earning above $80,250. That is, in fact, a tax increase.
Biden’s retirement plan changes hit higher earners with the intention of leveling the playing field of tax deferrals. His unintended targets could be everyone — the employers included. Reducing the tax benefits that higher earners receive could increase the likelihood of businesses abandoning those retirement packages altogether.
Employers who pay their share of 401(k) plans have to offer the same benefit to everyone. Under the Democrat plan, business owners would see their own tax benefit eroded. Some bosses—particularly on the higher earning end – may lack the incentive to continue offering retirement accounts if their tax benefit is slashed.
The CEO of the American Retirement Association, Brian Graff, starkly observed, “If you take the tax deduction away and reduce the tax benefit, without also addressing the nondiscrimination rules (of retirement plans), you’ve blown up the bargain.”
Then there is the troubling news that Biden supports a financial transaction tax on middle-class Americans proposed by Sen. Bernie Sanders. This is where the federal government charges a fee to 401(k) accounts each time a transaction occurs.