While President Joe Biden and Congress try to figure out how to pass his major spending initiatives — and to what extent they'll be passed — Democrats also intend to implement another major change in federal income tax policy as part of the process.
And Biden and virtually all Democrats in Congress have made no secret they plan to undo the tax cuts former President Trump signed into law that was passed by Republicans in Congress in 2017.
The Washington's Institute on Taxation and Economic Policy analyzed the tax proposals that are now being considered by Congress and basically came up with the following conclusion: The wealthiest will pay more, those at the lowest end of the income will pay less and taxes for those in the middle will remain basically unchanged.
The student did conclude those with children will receive some tax breaks. And everyone, including low income earners, could be indirectly affected by proposed tax increases on cigarettes and corporations.
The study also concluded the wealthy, whether they have children or not, will play a lot more. Congress hopes to pass some kind of spending package that Biden has proposed by the end of the month and that package should include all the proposed tax policies in tact.
The study concluded 2.4 percent of Californians would see a tax increase under the plan approved by the House of Representatives House Ways and Means Committee. The study concluded basically all those who would receive tax increases make more than $400,000 a year.
The study concluded basically only the top five percent would pay tax increases while 60 percent of the lowest income should receive a tax cut. There will basically be no changes for those making between $83,000 and $360,000 a year, the study concluded.
The non-partisan Tax Policy Center has also estimated no one making less than $200,000 will pay higher taxes and 99.4 percent of those making $200,000 to $500,000 won't pay increased taxes.
The top tax rate that was cut to 37 percent in 2017 would be restored to 39.6 percent for those making more than $400,000 a year.
Those making less than $29,100 a year and those with children would benefit the most from proposed tax plans, the WITEP study concluded as proposed child tax credits and earned income tax credits are concerned. The child tax credit which provides $3,000 to $3,600 per child would be extended through 2025.
The current child tax credits and earned income tax credits are scheduled to expire at the end of the year. The earned income tax credit provides $1,525 for those making less than $22,000 a year.
In California, the middle class with children would see a tax cut between $700 and $930 as a result of the child tax credit. Those making less than $29,100 with children would see a tax cut of $1,110.
The WITEP study was updated to include new estimates based on a proposed 3 percent wealth tax that would work effectively the same as state property taxes on those who make more than $5 million. As a result, the study concludes the wealthiest would pay on average 4.5 percent more in total taxes.
Congress' Joint Committee on Taxation estimates the tax proposals would raise $2.1 trillion over 10 years. The WITEP study also concludes the proposal to raise the top tax rate from 37 to 39.6 percent would affect just 1.6 percent of tax payers. The study also conclude the richest 1 percent would pay 97 percent of the increase caused by raising the top rate from 37 to 39.6 percent.
A proposal to raise corporate taxes from 21 to 26.5 percent would raise $1 trillion over the next 10 years, the study concluded. The study conclude corporate tax increases would raise $88 billion in 2022. But there's a fear this would have an indirect affect on the lower income as corporations could keep wages down to account for the tax increase.
Another proposed tax increase that would affect the lower income is a proposal to raise the tax on cigarettes by $1, which is expected to raise $97 billion in revenue.
But the study also concludes whatever indirect tax increases the lower income would see would be more than offset by tax cuts they would receive. The study concludes the lowest 20 percent in income would receive a 10 percent tax cut. It also states 80 percent of tax increases would be paid by the top 1 percent.
The study concluded corporate tax increases would raise $88 billion in 2022.
The top tax rate on capital gains would also be raised from 20 to 25 percent. But the study states not as much revenue as expected may not be raised because people would find loopholes to get around the capital gains tax increase.
Again, while the tax proposals have basically remained in tact, the one major proposal from Biden that didn't survive in Congress was a measure to prevent people from finding loopholes to avoid the capital gains tax increase when it comes to inherited capital gains when a wealthy person dies.