In presidential election years, we always like to take a closer look at what certain tax plans will mean for your finances. This presidential election year is no different.
While President Donald Trump signed the Tax Cuts & Jobs Act into law, which represented a significant tax reduction for many middle-class to upper-class Americans, it’s worth exploring how Democratic challenger Joe Biden’s tax plan will alter things should he win the election.
While the specifics of Biden’s plan are not completely clear just yet, we do know enough about his intentions and what they’ll mean for you. Here’s a closer look:
Biden’s Promise No Tax Increases for Americans Making Less than $400,000
One of the major talking points of Biden regarding his tax plan is that he has promised not to increase taxes for any American making less than $400,000 a year. Considering that only about 10 percent of Americans earn more than $100,000 a year, this is a plan that will obviously go to implement higher taxes on the most wealthy. In fact, only about 2 percent of American households annually report income north of $400,000. It’s a consistent Democratic Party-held point that those who are the most wealthy and earn the most money in this country should chip in a little bit more to help fund programs that benefit all Americans.
On paper, it’s not technically “socialist.” In fact, of the seven current tax brackets that American can fall into, the only one that will theoretically change based on Biden’s plan as we currently understand it is the top one. It’s currently at 37 percent and will increase to 39 percent under Biden’s plan.
But, here’s the thing: Biden may not be the one calling all of the shots on America’s finances should he win the election. To keep things fair, we’ll focus on his platform specifically, but bare in mind that everything is subject to change.
Other Key Aspects That Could Impact You
While Biden’s tax plan is somewhat straightforward, there are a few other news and notes to pass along based on how he wants to tax if he were elected president. Here’s a look at some of the highlights:
- Biden wants a 28 percent corporate tax rate, which is a bit higher than where it currently sits at 21 percent. However, prior to the Tax Cuts & Jobs Act, this rate was 35 percent.
- Currently, global corporations pay a 10.5 percent minimum tax on foreign profits. Biden wants to double that.
- Biden has also announced that he’ll give tax breaks to businesses that continue to invest in America or that restore old buildings.
While Biden predictably has plans to increase the corporate tax rate, his income tax plan for individuals would only impact the country’s top earners were he to be elected – and even then, the tax increase is a modest one. The bottom line, however, is that tax plans are mostly campaign talking points. They’re easy to discuss, but difficult to implement and consist of drafting bills that will clear both chambers of Congress. Trump has the advantage of having recently implemented a tax reform — one that has already been coupled with sharp economic growth.