Majority Of Americans Are Unlikely To See A Hike In Taxes Under The Biden Administration

Previously, President Donald Trump claimed that a vast majority of Americans would be hit by a hike in taxes under Joe Biden's administration. However, it is highly unlikely that something like that would happen. "Our economy is going to be, next year, if we don't have somebody that raises taxes and quadruples taxes, which they want to do -- it kills everything -- our economy is going to be phenomenal next year," said Trump during their competing town halls back in October, according to CNN. Contrary to his assertions, Biden plans on increasing taxes for residents making over $400,000 per year. This means the middle-income households could expect an average tax cut of $680, while the low-income households could see their tax bills reduced by $760, annually, per an analysis by the Urban-Brookings Tax Policy Center. 

The ones who would have to bear the brunt of the tax hikes proposed by Biden are the wealthy and corporations, reports CNN. That being said, even the wealthiest Americans would not see their taxes quadruple as claimed by Trump. Biden's plan won't work if Republicans win at least one of the two runoff races that are set to take place in Georgia on January 5. Winning would allow Republicans to keep control of the Senate and stopping President-elect's plan from passing. Now, if the Democrats manage to flip both the seats, it would result in the Senate being evenly divided, thus giving Vice President-elect Kamala Harris the tie-breaking vote.

During this pandemic, increasing the taxes for anyone might be more of a challenge than you think. Americans could witness bipartisan support for changes in tax that lower the burden for some residents, for example, the expansion of the child tax credit or tax benefits for saving for retirement. Currently, versions of both have support from lawmakers on either side of the aisle and were reportedly included in Biden's plan.

So, what exactly is Biden's proposal? 

Per the campaign plan of Biden, it wouldn't raise individual taxes on anyone who earns less than $400,000 per annum, which accounts for more than 90% of the taxpayers. However, it would reverse the Republican-backed 2017 tax cuts for people earning higher and raise the corporate tax rate from 21% to 28%, according to CNN. The revenue coming in from these tax hikes have been estimated to be more than $2 trillion over a course of 10 years. It will help pay for some of the other plans Biden has for increasing federal spending in areas like health, education, and the environment. But without the increases in tax on the super-rich and corporations, President-elect may not be able to fund some of the other agenda items.

There are key provisions included in the Republican tax package that ends in 2025, meaning a lot of people would witness a hike in their taxes if Congress doesn't pass an extension, thus creating a troublesome situation for the term succeeding that of Biden's. In the short term, the issue of paying for any additional tax cuts to help communities suffering from the pandemic or the recession would still remain. There's a possibility of these provisions being included in a pandemic-related stimulus bill, the cost of which would eventually be added to the budget deficit. Else, a tax hike would have to be introduced in order to fund them. Even with a divided Congress, Howard Gleckman, a senior fellow at the Tax Policy Center, is not ruling out tax hikes on corporations (excluding individuals) to get enough money for some of these plans. Gleckman predicted a situation where the Democratic-controlled House would send a bill to the Senate proposing a tax cut for the average income families, leaving Republicans in a dilemma. "I think it would be hard for Republicans to resist," said Gleckman.