Taxing Times: Biden Announces Plan to Raise Taxes For Richest Americans​

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By Curtley Bale​


The Story

Following a hectic first 100 days as US President, Joe Biden is looking to continue the trend of proposing legislation that will help the American people. After administering 200 million doses of the Covid-19 vaccine, an increase from his original promise of 100 million, Biden is trying to raise tax levels for the wealthiest of Americans.

Under the plans, America’s richest 1% will pay more tax to fund the newly-announced American Families Plan. This plan sees a continuation of tax-and-spend policies after recent announcements regarding corporation tax. Taxes raised from this plan are set to be invested into education and childcare reform (Financial Times).

What it Means for Businesses and Law Firms

Biden’s plan is targeted at those earning a yearly salary of $400,000 or more per year - the wealthiest 1% of Americans. In his joint Congressional address last week, he asked the richest Americans to “pay their fair share” (The Guardian). The current level of income tax for those in the top bracket is 37%, and this figure looks set to be increased to 39.6%. Biden hopes that this tax hike will raise over $1.5 trillion during the next decade.

The $1.8 trillion American Families Plan could be one of Biden’s landmark pieces of legislation if the bill garners enough support on Capitol Hill. The proposals include greater child support, more funding for pre-kindergarten classes and community colleges, and reconnecting "communities of colour that have seen highway and other projects tear through their neighbourhoods" (E&E News).

An additional part of the tax reforms includes a change to the capital gains tax structure. Traditionally, capital gains (a tax on the profit made during the sale of an asset) have been taxed at a lesser rate than income tax. At present, the top bracket of capital gains tax is 20%. The new plan will set the top bracket of capital gains to come in line with the top bracket of income tax (39.6%) for those earning capital gains and dividend payments in excess of $1 million per year (NBC).

This is likely to impact the top 0.3% of Americans, and will include private equity and hedge fund managers who usually see their profits taxed as a capital gain rather than as income. Including the 3.8% tax surcharge for top earners due to Obama’s Medicare, those in the top bracket of investment income would have a total tax bill of 43.4%. There will also be an increase of capital gains tax upon death for gains of more than $1 million at the highest level of tax at 39.6% (CNN).

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