Kara Sears
Joe Biden's tax agenda includes raising rates on large corporations and upper-income individuals, limiting or eliminating incentives for certain taxpayers, and reversing years of underfunding of the Internal Revenue Service (IRS). Biden's tax plan is funded by notable changes in tax law, including the American Rescue Plan Act, which provided cash payments to individuals and tax credits for lower-income families. Biden has also proposed the American Jobs Plan, which would increase income taxes on corporate profits to fund infrastructure improvements. The Inflation Reduction Act, enacted under Biden, has increased taxes and IRS funding to improve enforcement and raise revenue from higher earners. Biden's FY 2025 budget proposal includes raising the corporate income tax rate from 21% to 28%increasing the top individual income tax rate from 37% to 39.6%
| Characteristics | Values |
|---|---|
| Tax law changes | Fund the three key elements of his Build Back Better program |
| American Rescue Plan Act | Provided cash payments to individuals and included tax law changes benefiting lower-income individuals and families |
| Child Tax Credit | $3,600 per child under age 6 and $3,000 per child ages 6 through 17 |
| Maximum credit for individuals | $4,000 for one individual and $8,000 for two or more qualifying individuals |
| Earned Income Credit (EIC) | Extended to workers under age 25 |
| American Jobs Plan | Increase income taxes on corporate profits |
| Top individual federal income tax rate | Rise from 37% to 39.6% |
| Corporate tax rate | Rise from 21% to 28% |
| Minimum tax on corporate book income | 15% |
| Targeted taxpayers | Large corporations and upper-income individuals |
| Inflation Reduction Act | Increases the IRS's budget by $80 billion over 10 years |
| FY 2025 Budget Proposal | Raising the corporate income tax rate from 21% to 28% |
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What You'll Learn
Tax hikes on businesses and high earners
President Joe Biden's tax agenda includes plans to increase taxes on large corporations and high-income individuals. Biden's proposals include raising the corporate income tax rate from 21% to 28%, which would increase the top combined marginal rate on corporate income from 25.6% to 32.2%—the second-highest rate in the OECD. This would include a 15% minimum tax on corporate book income.
Biden also intends to increase the top individual federal income tax rate from 37% to 39.6% (or 45.1% including the additional Medicare tax). This would push the top combined marginal tax rate on capital gains income from 29.1% to 47.6%, including the proposed changes. These changes would result in the US exceeding international norms for capital gains taxes.
The proposed tax hikes are part of Biden's Build Back Better program, which aims to address the perceived imbalance created by the 2017 Tax Cuts and Jobs Act, which Biden claims benefited large corporations and wealthy individuals. The tax hikes would also fund the American Jobs Plan's infrastructure improvement goals, estimated to cost $2.3 trillion.
Biden's FY 2025 budget proposal also includes plans to raise taxes on businesses and high earners, with combined top marginal rates on individual income exceeding 50% in five states and Washington, D.C. Biden has also proposed raising taxes on households with a net worth of over $100 million.
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Changes to tax credits
President Joe Biden's tax agenda includes changes to tax credits, with a focus on increasing rates for large corporations and upper-income individuals while providing relief to lower-income individuals and families.
The American Rescue Plan Act, signed into law by Biden in March 2021, included temporary changes to certain individual tax credits, such as an increase in the child tax credit and the child and dependent care tax credit. These changes were designed to provide economic relief during the pandemic and generally expired at the end of 2021.
The Biden administration has also proposed increasing the earned income credit (EIC) by eliminating the maximum age requirement and extending it to workers under 25. This change would allow younger individuals to benefit from a higher phase-out level and apply the credit to more earned income.
Additionally, Biden's FY 2025 budget proposal includes plans to raise the corporate income tax rate from 21% to 28%, increasing the top individual income tax rate from 37% to 39.6%raising the corporate alternative minimum tax from 15% to 21%. These changes aim to address the perceived imbalance created by the 2017 Tax Cuts and Jobs Act, which Biden argued disproportionately benefited large corporations and wealthy individuals.
The Inflation Reduction Act, enacted under Biden, also includes tax credit changes. While it is ranked as the 23rd largest tax hike since 1940, the actual revenue effects are uncertain due to changing rules surrounding energy tax credits. The Act increases the IRS budget to improve enforcement and raise revenue from higher earners who evade taxes.
Overall, Biden's tax plan seeks to increase taxes on businesses and high-income earners while providing tax relief to lower-income individuals and families through targeted tax credit changes.
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Reversing IRS underfunding
The Biden administration has proposed to reverse years of underfunding the Internal Revenue Service (IRS), which has resulted in reduced auditing and enforcement efforts, personnel shortages, and substantial losses in government tax revenue. The underfunding has also led to the lowest audit rate of wealthy filers in history.
Biden's proposals include increasing IRS funding to improve tax law compliance by corporations and high-income individuals. This increase in funding is expected to enable the IRS to recover hundreds of millions of dollars in unpaid tax liabilities due to under-enforcement. Strengthened government oversight of paid tax-return preparers is also part of the proposal to prevent the exploitation of taxpayers claiming credits.
The IRS will utilize improved technology and Artificial Intelligence to better detect tax cheating, identify emerging compliance threats, and improve case selection. This will allow them to focus their efforts on high-risk areas, such as large partnerships, hedge funds, real estate investment partnerships, and large law firms, without burdening taxpayers with unnecessary audits.
Additionally, the Biden administration plans to increase income taxes on corporate profits to fund infrastructure improvement goals as part of the American Jobs Plan. The increased taxes on large corporations and upper-income individuals aim to address the perceived imbalance created by the 2017 Tax Cuts and Jobs Act, which benefited corporations and wealthy individuals disproportionately.
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Raising corporate income tax rates
President Joe Biden's tax agenda includes raising corporate income tax rates. This proposal is part of Biden's FY 2025 budget, which aims to increase taxes by nearly $5 trillion for corporations and individuals with incomes above $400,000. The plan is to raise the corporate income tax rate from 21% to 28%. This would increase the top combined integrated tax rate on corporate income distributed as capital gains from 47.2% to 66%, the highest in the OECD.
The corporate tax rate increase is a key element of Biden's Build Back Better program, which also includes investments in infrastructure improvements estimated at $2.3 trillion. The increased taxes on corporate profits are intended to fund these infrastructure improvements.
Biden's proposal also includes raising the corporate alternative minimum tax from 15% to 21% and increasing the corporate stock repurchase excise tax from 1% to 4%. These provisions were enacted as part of the 2022 Inflation Reduction Act.
Additionally, Biden's tax plan proposes to raise the tax rate on the foreign earnings of US multinational corporations from 10.5% to 21% and adopt an undertaxed profits rule (UTPR). These changes aim to ensure that corporations pay their fair share of taxes, with Biden stating that "no one making $400,000 per year or less will pay a penny more in new taxes."
The proposed corporate income tax rate increase has sparked concerns about its potential impact on US businesses' competitiveness and investment prospects. Critics argue that the higher tax rate could worsen the competitive position of US companies in the global market and hinder their ability to invest and grow.
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Impact on US competitiveness
President Joe Biden's tax agenda includes plans to increase tax rates on large corporations and high-income individuals. The proposed changes aim to address the perceived imbalance created by the 2017 Tax Cuts and Jobs Act, which Biden argued disproportionately benefited large corporations and wealthy individuals.
Biden's tax plan, funded by notable changes in tax laws, has three key elements: the American Rescue Plan, the American Jobs Plan, and the Build Back Better program. The American Rescue Plan, signed into law in March 2021, provided cash payments and tax credits to lower-income individuals and families. The American Jobs Plan proposes to increase income taxes on corporate profits to fund infrastructure improvements.
The Build Back Better program includes proposals for tax increases on businesses and the top 1% of earners. Biden's FY 2025 budget proposal includes plans to raise the corporate income tax rate from 21% to 28%, the corporate alternative minimum tax from 15% to 21%, and the top individual income tax rate from 37% to 39.6%. These changes would significantly impact US competitiveness.
The proposed corporate income tax rate increase would worsen the competitive position of US businesses, reduce prospects for business investment and workers, and potentially discourage investment. According to experts, the corporate income tax is the most harmful tax for economic growth, and increasing the rate could negatively affect the US economy. The proposed tax rate of 28% would be the second-highest in the OECD, surpassed only by Colombia at 35%.
Additionally, Biden's plan to raise the effective tax rates paid by households with net worth over $100 million could also impact US competitiveness. The combined top marginal rates on individual income in some states and DC would exceed 50% under the proposal. However, Biden has committed to not raising taxes on people earning under $400,000.
The Inflation Reduction Act, enacted under Biden, has also increased the IRS's budget to improve tax enforcement and raise revenue from higher earners who evade taxes. While this may help fund government initiatives, it could also create a more complex tax environment, making enforcement more challenging.
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Frequently asked questions
President Biden's tax law is a part of his Build Back Better program. The law includes changes to individual tax credits, such as the child tax credit and the child and dependent care tax credit. The law also eliminates the maximum age for eligibility for the earned income credit (EIC).
The main goal of Biden's tax law is to increase taxes on large corporations and high-income individuals while providing tax relief to lower-income individuals and families.
Biden's tax law proposes to increase the corporate income tax rate from 21% to 28%, as well as increase the corporate alternative minimum tax from 15% to 21%.
Biden's tax law proposes to increase the top individual income tax rate from 37% to 39.6%. The law also includes changes to the child tax credit and the earned income credit.
The impact of Biden's tax law is expected to be significant. The law is projected to raise revenue from higher earners and improve taxpayer services. However, the complex nature of the law may make it more difficult for the IRS to enforce.
