Joe Biden’s administration is proposing significant changes to the U.S. tax code that have garnered attention and concern, particularly from former World Bank officials. The proposed tax plan includes several measures aimed at increasing revenue and ensuring that wealthy individuals and large corporations pay their fair share.
Key components of the plan include:
- Increased Income Tax Rates: The top individual income tax rate would rise to 39.6% for single filers earning over $400,000 and joint filers earning over $450,000.
- Capital Gains and Dividends: Long-term capital gains and qualified dividends would be taxed at ordinary income tax rates for incomes above $1 million. Additionally, unrealized capital gains would be taxed at death for amounts exceeding a $5 million exemption for single filers and $10 million for joint filers.
- Corporate Taxes: The corporate tax rate would increase to 28%, which is expected to have significant economic impacts, including reducing long-run GDP by 1.3% and decreasing full-time employment by approximately 335,000 jobs.
- Estate and Retirement Taxes: Rules related to the estate tax would be tightened, and high-income taxpayers with large individual retirement account (IRA) balances would face limitations on retirement account contributions】.
- Specific Industry Taxes: The budget introduces a 30% tax on energy used in cryptocurrency mining operations and eliminates certain tax benefits for the petroleum industry.
- New Minimum Tax: A 25% “billionaire minimum tax” on unrealized capital gains of high-net-worth individuals is proposed to ensure that the wealthiest Americans contribute more to federal revenues.
- Tax Credits: Several tax credits would be extended or made permanent, such as the American Rescue Plan Act (ARPA) Child Tax Credit and the Earned Income Tax Credit (EITC) expansion for workers without qualifying children.
The administration argues that these measures are necessary to reduce the federal deficit and fund critical investments in the American people. However, critics, including some former World Bank officials, warn that these tax increases could have adverse economic effects, potentially reducing investment, wages, and employment.
For more detailed information, you can refer to the U.S. Department of the Treasury’s outline of the tax proposals and the analysis provided by the Tax Foundation.