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President Joe Biden is planning to raise taxes on millionaire investors to fund child care and education programs, according to a report from The New York Times.
Biden is set to reveal the American Family Plan — part of Biden’s $4 trillion overhaul on the US economy — before addressing Congress next week. But the Times reports that Biden’s proposal will not tackle health care reform.
In addition to tax raises, the plan will reportedly seek to extend through 2025 the expanded child tax credit, which gives American parents recurring cash payments and stands to substantially cut child poverty. This four-year extension is not quite the permanent measure Democrats had been pushing for.
Biden’s tax increases will target the wealthy, although they aren’t the same as the straightforward “wealth tax” proposed by some progressives.
Instead, America’s highest earners could see their income tax rate increase to 39.6%. Capital gains — profits made from selling assets like stocks — are currently taxed differently from income, often at a lower rate of up to 20%; under Biden’s reported proposal, that rate will increase to 39.6% for people who make over $1 million.
According to the Times, the proposal would also look at getting rid of an aspect of the tax code that reduces taxes paid on assets that people inherit. That could be the stepped-up basis, where inheritors of an asset that’s become worth more over the time it was held — like a house that’s increased in value — pay taxes only on the value of the asset when it’s inherited, not the gains it saw over time.
Also reportedly under consideration are hikes to the estate tax, as well as a cap on deductions that wealthy taxpayers can take. All told, the increases will still only target those making $400,000 and above, according to the Times.
Biden is also looking to beef up the Internal Revenue Service (IRS), which could bring in more revenue through increased enforcement of wealthy taxpayers. A recent study by IRS researchers and economists, which looked at the top 1% of taxpayers, found that “collecting all unpaid federal income tax from this group would increase federal revenues by about $175 billion annually.”
IRS Commissioner Charles Rettig recently said in a Senate Finance Committee hearing that the amount of taxes going uncollected every year could be over $1 trillion. Rettig also said increased funding — like the $1.2 billion increase in Biden’s “skinny budget” — could help the IRS increase its enforcement. Over the last decade, their number of enforcement personnel have decreased by 17,000.
This is a developing story. Please check back for more updates.
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