The Wall Street Journal correctly warns about Joe Biden’s tax plan:
Joe Biden got a pass from the media for the myriad whoppers he told about his policies in Thursday night’s town hall. But one that we can’t let slide was his claim that he only intends to make people earning more than $400,000 “pay what they did in the Bush Administration—39.6%.”
Where to begin? The Bush tax cuts in 2001 and 2003 cut the top individual tax rate to 35% from 39.6%. A 2012 deal between the Obama Administration and House Republicans extended the Bush tax cuts for the middle class while returning the top rate to 39.6% for those earning more than $400,000, plus the 0.9% Medicare surtax imposed by ObamaCare.
Republicans in 2017 lowered the top rate to 37%, and Mr. Biden says he would merely return the rate to where it was before the GOP tax cuts. But that’s before add-ons. He would also restore the Pease deduction limitation for high earners, which tacks on the equivalent of 1.2%.
He also wants to extend the Social Security 12.4% payroll tax to income over $400,000. The current cap is $137,700. Half of the payroll tax is paid by the employer, but economists know it’s still a tax on labor income, which means workers. The top marginal rate would rise to 57% including 3.8% in Medicare taxes, and that’s before state taxes that run as high as 13.3% in California.
Oh, and he’d also raise the tax on the capital gains of high earners to the same rate as wage income, increasing the rate to 43.4% (39.6% plus Medicare 3.8% investment tax) from 23.8%.
And I hasten to add that while $400,000 does look like an income only the “rich” will have to deal with, over time as wage inflation pressures continue in the country a lot more people will fall into the $400,000 bracket.
If you are earning as low as $150,000, I would be concerned by this tax increase. Bracket creep will eventually get you.
And that 12.4% payroll tax above the current $137,700 level is going to slam you even sooner.