Biden's Tax and Spending Plans: Running the Numbers
The Tax Policy Center updates its estimate of the financial effects of policies like raising the estate tax and expanding child tax credits.
Democratic presidential candidate Joe Biden’s newest tax proposals include increasing the estate tax, applying Social Security payroll taxes to earnings above $400,000 and replacing deductions (or income exemptions) for retirement contributions with a refundable credit — to name just a few.
The Tax Policy Center released its revised analysis and economic projections Thursday. They are based on the tax plans announced by the Biden campaign since March. On net, Biden’s proposals would increase federal revenue by $2.4 trillion over the next decade, the center-left think tank estimates.
The center says its new revenue estimate “is significantly lower” than its March estimate for a number of reasons.
These factors include “several tax credit provisions the Biden campaign has proposed since our initial analysis, our assumption that implementation of most proposals will be delayed until 2022, changes to previously proposed policies that are intended to hold harmless tax filers with incomes below $400,000, [and] a revised economic forecast as well as other technical changes,” it explained.
The largest Biden tax proposals — reflected in the latest Tax Policy Center analysis but not included in its March report — are to:
- Temporarily expand and make fully refundable the child tax credit.
- Provide credits for new investments in domestic manufacturing.
- Provide a refundable first-time homebuyer’s credit.
- Expand and make refundable the child and dependent care tax credit.
- Provide a refundable low-income renter’s credit.
- Increase the estate tax
- Establish a financial risk fee on liabilities held by large financial institutions.
The estate tax would be restored to the nominal estate, gift and generation-skipping transfer tax parameters in effect in 2009, with the top tax rate at 45%; the exclusion amount would be $3.5 million for estate and generation-skipping transfer taxes, would be $1 million for gift taxes, and would not be indexed for inflation.
Biden’s tax proposals would increase federal revenues relative to current law by about $2.4 trillion between 2021 and 2030, or 0.9% of gross domestic product over that period, the Center projects.
“About 40% of the revenue gains would come from higher taxes on high-income households and high-value estates, and about 60% would come from higher taxes on businesses, especially corporations.”
Biden’s spending proposals, the analysis states, would have important distributional and economic effects.
Those proposals also include changing Social Security benefits, providing federal financial aid for postsecondary students and forgiving some student loan debt, expanding premium subsidies under the Affordable Care Act, providing federal housing assistance, and creating a public insurance option for ACA Marketplaces.
‘Revenue Raisers’
The largest revenue raisers over the 10-year budget window are tied to the following Biden policies:
- Apply Social Security payroll taxes to earnings above $400,000 (raising $740 billion);
- Increase the corporate income tax rate from 21 to 28% ($730 billion);
- Increase minimum taxes on foreign-source income of U.S. multinational corporations ($710 billion);
- Increase taxes on capital gains and dividends for taxpayers with incomes above $1 million ($370 billion);
- Repeal the 2017 tax law’s individual income tax cuts for taxpayers with incomes above $400,000 ($310 billion);
- Limit the value of itemized deductions for taxpayers with incomes above $400,000 ($220 billion); and
- Increase the estate tax ($220 billion).
Tax Credits
The additional revenue would be partially offset over the 10-year budget window by approximately $1.2 trillion in additional tax credits.
The largest tax credit provisions, the Tax Policy Center said, are the following:
- Temporarily expand and make fully refundable the child tax credit (at a cost of $240 billion);
- Provide credits for new investments in domestic manufacturing ($230 billion);
- Provide a refundable first-time homebuyer’s credit ($210 billion);
- Replace deductions (or income exemptions) for retirement contributions with a refundable credit ($150 billion); and
- Expand and make fully refundable the child and dependent care tax credit ($110 billion).
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