“Normally you don’t raise taxes in a recession, which is why we haven’t” former President Obama told Chuck Todd in an August 2009 interview as the economy slugged along towards recovery. Yet President Obama’s former Vice President is now promising to do just that, albeit without much attention from the media. According to five independent economic analyses, (the Urban-Brookings Tax Policy Center (TPC), the Tax Foundation , the Committee for a Responsible Federal Budget (CRFB), the American Enterprise Institute (AEI) and the American Enterprise Institute) the former Vice President Biden is proposing between $3-5 trillion in new taxes to fund his party’s wish list of spending proposals. The Biden tax hike plan, far more extreme than former Democratic Presidential nominee Hillary Clinton’s proposal put forth in 2016, has largely fallen under the radar in a year where the virus, unrest in cities, and the media’s invented scandals of the day have dominated cable news. At AMAC Action we’ve studied the details of the Democrats’ tax plan and evaluated the veracity of their claims to not raise taxes on most Americans. Below we lay out the major differences in the Trump vs. Biden proposals and let you decide for yourself which plan is more likely to lead to prosperity for America.
Current Law: In December of 2017 President Trump signed into law an across the board tax cut, lowering taxes for most Americans. Like most of the Trump tax cuts, these changes are set to expire in December of 2025. The top individual tax rate is currently 37%.
Joe Biden: “Nobody making under 400,000 bucks would have their taxes raised, period, bingo.” Joe Biden’s claim that no one making under $400,000 would see their taxes go up is false according to at least 5 independent economic models, but is being reported as true, or left alone altogether by the media. While it is true that his plan calls for keeping rates steady for the middle class and enacting new tax credits that may benefit many in the middle class, Biden’s proposal to raise the corporate tax and taxes on businesses would make middle-class workers across the board poorer. An August 2020 Tax Foundation analysis states: “while Biden’s tax plan would make the tax code more progressive, it would reduce after-tax incomes for filers across the income spectrum by reducing the incentive to work and invest in the United States.” The analysis shows that if enacted the Biden/Harris tax hikes would eliminate nearly 600,000 jobs. Even the Washington Post, whose fact-checkers are known for contorting themselves to help support Democratic claims, decided to leave Biden’s claim unrated. The Biden/Harris plan calls for raising the top individual rate from 37% to 39.6%.
President Trump: President Trump has called for a new “10% middle-class tax cut” while promising to extend all of the positive changes from the Tax Cuts and Jobs Act, keeping taxes low or reducing them further for most taxpayers.
Capital Gains Taxes
Current Law: President Trump’s Tax plan set the long term capital gains rate at 20% while retaining the Obama era 3.8% net investment income tax on high earners. Over 50 million Americans have some type of savings in a retirement plan or the market.
Joe Biden: Raise the top capital gains rate from 20% to 39.6% on high earners (tax capital gains as ordinary income).
President Trump: Index the current capital gains rate to inflation and further reduce the capital gains rate for all taxpayers.
The Death Tax
Current Law: President Trump’s Tax Plan nearly eliminated the estate tax by raising the current exemption to protect most family-owned businesses and farms. This less-burdensome death tax is set to expire in December 2025 if Congress does not vote to extend the current law.
Joe Biden: Hike the death tax by undoing the positive changes the President made in the Tax Cuts and Jobs Act. Eliminate “step-up in basis” on inherited assets. Force capital gains taxes to be paid at death on unrealized gains from inherited assets.
President Trump: Extend the current exemption and permanently repeal the death tax. The President believes that no one should have to visit the taxman and the grim reaper on the same day.
Deductions and Credits
Current Law: President Trump doubled the standard deduction to over $24,000 per couple simplifying taxes for nearly 30 million taxpayers, enacted a new 20% small business deduction, and enacted a more generous child tax credit of $2000 per child and $500 per dependent.
Joe Biden: Phase out a number of credits and deductions for individuals starting in the 28% bracket. Enact a number of new tax credits promoting green energy. Eliminate the 20% small business deduction for many privately owned businesses.
President Trump: Permanently extend the expanded standard deduction, child tax credit, and 20% small business deduction to help families and small businesses.
In comparing the proposals between President Trump and Joe Biden there is a consistent theme: Joe Biden is likely to hike your taxes while President Trump will keep them low or reduce them even further. As the Presidential campaigns head into the final stretch, look for Biden to continue to claim his plan won’t affect anyone but the wealthy. Armed with the facts you can now fact check Biden/Harris for yourself. President Trump understands, and several independent economic studies confirm, that you simply cannot raise taxes on businesses, as Joe Biden hopes to do, without affecting workers and the economy as a whole. Even President Obama publicly rejected the idea of raising taxes during a recession but Biden/Harris will have no choice if they are to fund a transformational Democratic agenda on climate, education, health care, and social justice. Our AMAC Action team will continue to cut through the rhetoric, keeping you informed on the reality of what Democrats are proposing. Please continue to stay engaged through the home stretch of this election season as we work to keep you informed and stand ready to protect your pocketbook, your small business, and the economy.
Written by Palmer Schoening