Biden to introduce tax increase plans immediately, even if COVID-19 recession continues: Gasparino
Sources tell FOX Business’ Charlie Gasparino that Joe Biden wants to push through tax increases to pay for front-loaded infrastructure and climate legislation.
According to Joe Biden’s tax plan, three states and New York City would have top marginal state and local tax rates of more than 60%.
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California would have the highest marginal state and local tax rate, at 62.64%, according to an analysis by leading free-market think tank the Tax Foundation. After California would be Hawaii at 60.34%, New Jersey at 60.09%, Oregon at 59.24% and Minnesota at 59.19%.
New York City would have a 62.03 top rate and Washington, D.C., would have a 58.29 top rate.
The foundation said that Biden’s tax plan does not repeal the SALT deduction cap enacted under Trump’s 2017 tax cut. Biden has suggested that such a repeal would be left to Congress.
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Rates under Biden’s plan would be the highest they’ve been since the Tax Reform Act of 1986, which lowered the top tax rate for individuals from 50 to 28%. Before the Act, seven states and Washington had top marginal tax rates higher than that of California’s under the Biden plan.
Under Biden's tax plan, "the all-in federal rates would be the highest since 1981," the foundation said.
Marginal tax rates are usually lower than average tax rates. Marginal rates are paid on the highest dollar earned, not on standard deductions or money earned that is lower than the highest tax bracket.
These states would see the lowest marginal tax rates under Biden’s plan, all tied at 49.34%: Nevada, Florida, Alaska, New Hampshire, South Dakota, Texas, Washington and Wyoming.
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Under current law, the top combined marginal rate is still in California, at 52.65%. That is made up of 37% top federal rate, a Medicare payroll tax of 1.45% paid by the employee, the additional Medicare tax created under the Affordable Care Act of 0.9% and the state rate, which in California is 13.3%.
Biden’s plan would raise the top individual income tax rate from 37 to 39.6%.
The Tax Policy Center estimates that Biden would raise taxes by nearly $4 trillion over the next decade, about 1.5% of Gross Domestic Product. They do note, however, that the highest-income 20% of households (who will make about $170,000 or more) would bear nearly 93% of the burden of Biden’s proposed tax increase, and the top 1% nearly three-quarters.
The TPC estimates the 2021 tax changes would reduce after-tax incomes of the highest-income 1% of households (those making about $837,000 or more) by an average of about $300,000, or 17%.
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Tax burdens on the top 0.1% (who will make $3.7 million or more) would increase by about $1.8 million, on average, nearly one-quarter of their after-tax incomes. Meanwhile, TPC says the 2021 tax changes would reduce the after-tax incomes of middle-income people by about 0.4%, or $260 and reduce incomes for those at the bottom of the income distribution by about 0.2%, or $30.
Fox News' Lucas Manfredi contributed to this report.
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