Biden’s tax policies are clearly designed to get most of their revenue from companies and the wealthy.
Blasting a $3.5 trillion social spending bill that Democrats hope to salvage, House Republican leader Kevin McCarthy asserted the legislation would break President Joe Biden’s campaign promise not to tax Americans who earn less than $400,000 a year. That’s technically accurate yet also misleading, the Associated Press reports.
McCarthy also falsely suggested Thursday that a Biden administration proposal to help pay for the legislation by boosting IRS tax enforcement would amount to spying targeted at everyday Americans.
A look at the claims and reality:
MCCARTHY: “Joe Biden said: ‘No one making under $400,000 will see their federal taxes go up.’ That’s a lie: In fact, under his plan, an average family who earns over $50,000 will see a tax increase.” — news conference Thursday.
BIDEN: “I give you my word as a Biden: If you make under $400,000 a year, I’ll never raise your taxes one cent. But, I’m going to make those at the top start to pay their share in taxes.” — tweet Sunday.
RONNA MCDANIEL, head of the Republican National Committee, replying to Biden’s tweet: “Not true — according to the Joint Committee on Taxation, Biden’s plan will hike taxes on families making $50K or more a year.” — tweet Monday.
THE FACTS: Biden’s pledge defies simple analysis. Republicans can legitimately ding the president for violating his campaign pledge to not raise taxes on anyone making less than $400,000. But Republican leaders also rely on an economic model in which any tax that clearly targets companies and wealthy stockholders can be interpreted as a middle-class tax hike.
So let’s skip the politics and focus on what is really going on here.
Congress’ Joint Committee on Taxation and other analysts use the idea of “tax incidence” when estimating how much people pay. This is an economic model about who bears the expense of tax changes. When companies face higher taxes, much of the cost is borne by shareholders. But some of the cost comes at the expense of workers in the form of lower salaries, and that’s a major reason why the Democrats’ policies can be portrayed as a middle-class tax hike.
Nearly 17% of taxpayers will pay more in 2023, including people earning less than Biden’s target, according to the Joint Committee’s analysis. This is a function of how economic models work, which seldom conform perfectly to the messaging of political candidates. Biden’s tax policies are clearly designed to get most of their revenue from companies and the wealthy.
But is McCarthy right that an average family earning $50,000 will see a tax increase? Not quite.
The Tax Policy Center has released an extensive analysis by income quintile. It found that the middle 40% to 60% of earners will get on average a cut of $630. This is true even though 70% of the tax units in this group would get a slight tax increase averaging about $230. How is that possible?
Well, the increases largely reflect how corporate tax hikes could reduce wages. But Biden’s plan also includes an expanded child tax credit that would help households with dependents under the age of 18. The tax credit ranges from $3,000 to $3,600 per child. This credit only goes to people with children. The credits are so large that the entire package nets out as a tax cut for people who think of themselves as middle class.
The Tax Policy Center analysis also makes clear that the increases are targeted at the wealthy. The top 0.1% of earners would owe an additional $1.1 million next year, enough to raise a total of $132.2 billion.
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