President-Elect Joe Biden’s Economic and Tax Plans
By Bellevue’s Julie Platt
During the Presidential transition, Bellevue Strategies will be spotlighting President-elect Joe Biden’s different policy platforms that will impact our clients. Although many of these plans may not become law, they give us an understanding of how the President-elect will govern.
This week we will be focusing on President-elect Biden’s Economic and Tax plans.
If you have any suggestions for what you like us to cover, please email Julie Platt.
The coronavirus has continued to excretable the economic trends our country has already been experiencing such as widening economic inequality and job displacement. President-elect Biden has called his economic recovery plan “Build Better Back”. His plan focuses on raising taxes on the wealthy and on corporations by reversing some of the Republican-backed tax cuts that were signed into law in 2017. Analysis of Biden’s tax plan found that it would raise between $2.4 and $4 trillion in tax revenue over 10 years.
Individual Taxes: President-elect Biden’s tax plan is viewed as pro-growth with a progressive tax code. Biden’s plan calls for raising the top individual income tax rate to 39.6% from its current level of 37% and extending the 12.4% portion of the Social Security tax — which is shared by employers and employees — to earnings over $400,000. Currently, wages up to $137,700 are subject to the tax. Currently, long-term capital gains rates are up to 20%, President-elect Biden wants the capital gains rate to rise to 39.6% for taxpayers with income over $1 million.
Addition tax changes include:
- Overhauling taxes around wealth transfers.
- An expansion of the child tax to a maximum of $3,000 for children aged 17 and under, plus a $600 bonus for children under the age of six. This tax would be fully refundable; currently, the tax credit is only partially refundable. Biden’s plan also proposed allowing the option of spending the credit over the course of the year. Families would receive monthly payments.
- Increase the child and dependent care tax credit to a maximum value of $4,000 for one child or $8,000 for two or more children. This would also be refundable credit.
- A new tax credit of up to $5,000 for informal caregivers.
Many of Biden’s tax policies will depend on the results of the Georgia senate run-offs in January, and if Biden will have a small Democratic majority in the Senate. However, according to analysis, there are a few of President Biden’s tax policies that could garner support from GOP lawmakers. These include a temporary expansion of the child tax credit and potentially raising the corporate tax rate.
Corporate Taxes: President-elect Biden has said that he will roll back Trump’s corporate tax cuts on “day one” of his presidency. He has pledged to raise the corporate tax rate to 28% from 21% and impose a 15% minimum tax on income to ensure each company pays taxes. The tax rate will not be as high as it was before Trump, 35%, but matches the proposed tax rate of former president Barack Obama. This proposed tax plan could raise federal revenues by $2.4 trillion. However, even with an increased tax rate, some large companies could still pay $0 in federal taxes due to tax code loopholes and tax breaks.
COVID-19 Federal relief: The economy is in desperate need of a new federal stimulus plan. President-elect Biden’s plan calls for the next deal to include the following:
- Forgive a minimum of $10,000 per person of federal student loans.
- Increase monthly Social Security checks by $200/month.
- Provide Emergency paid sick leave to all employees in all sectors of the economy.
- Increase funds for small businesses and ensure that commercial banks are lending out funds quickly. President-elect Biden’s team would seek authority similar to the Defense Production Act to make sure lending platforms are giving priority to small businesses and not large or well-connected companies.
- Reward companies that commit to helping workers stay employed through maximizing work-sharing policies or short-term compensation programs. Under short-time compensation, businesses in distress keep workers employed but at reduced hours and the federal government help make up the difference in wages. At the moment, states bear the burden of paying for short-time compensation. President-elect Biden’s plan would have short-term compensation be 100% permanently funded by the federal government. Former President-Obama and Vice-President Biden used this program during the last great recession.
Higher Federal Minimum wage: President Biden’s economic plan also calls for raising the federal minimum wage to $15 an hour. The federal minimum wage has been $7.25 an hour since 2009, which comes out to roughly $15,000 a year for someone working 40 hours a week. Although the likelihood of passing an increased minimum wage looks slim, there are things the federal government can do to increase wages. For example, Biden’s administration could increase the minimum wage for workers on federal contracts through an executive order. Business lobbying groups such as the Chamber of Commerce support raising the federal minimum wage to $10 an hour.