Politics

Even moderate Joe Biden would significantly increase taxes on the wealthy if elected

Key Points
  • Former Vice President Joe Biden's plan to raise taxes on corporations and wealthy households would increase federal revenue by $4 trillion over the next decade, according to a new analysis by the nonpartisan Tax Policy Center.
  • While Wall Street may view Biden as more moderate than self-declared democratic socialist Sen. Bernie Sanders, investors would still face dramatic tax increases under his proposals.
  • The biggest tax increase on households would be the application of the payroll tax to income over $400,000. That provision alone would raise $962 billion over a decade, TPC found.
Democratic presidential candidate former Vice President Joe Biden answers a question from a reporter at a campaign event at the W Los Angeles hotel on March 4, 2020 in Los Angeles, California.
Mario Tama | Getty Images

Former Vice President Joe Biden's plan to raise taxes on corporations and wealthy households would increase federal revenue by $4 trillion over the next decade, according to a new analysis by the nonpartisan Tax Policy Center.

Biden has surged to front-runner status in the Democratic presidential primary after winning at least 10 states on Super Tuesday and racking up endorsements from key rivals. Investors cheered his success on Wednesday, sending the Dow Jones Industrial Average up by 4.5%, or 1,173 points -- the second-largest point gain on record. 

But while Wall Street may view Biden as more moderate than self-declared democratic socialist Sen. Bernie Sanders, investors would still face dramatic tax increases under his proposals, including higher rates on both ordinary income and capital gains. Corporations would also be subject to a significant rise in taxes at home and overseas. 

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"The proposal is very progressive," said Gordon Mermin, senior research associate at TPC. 

The Biden campaign did not immediately respond to a request for comment.

The $4 trillion in new revenue is roughly evenly split between increases in individual and business taxes. For households, restoring a top tax rate of 39.6%, up from 37% now, would generate about $143 billion over a decade, according to TPC. Capital gains would be taxed at the same rate as ordinary income for those earning more than $1 million, adding another $448 billion in federal revenue. 

But the biggest tax increase on households would be the application of the payroll tax to income over $400,000. That provision alone would raise $962 billion over a decade, TPC found.

Those measures mean the wealthiest households would experience the biggest hit under Biden's proposal. Overall, TPC calculated that almost 93% of the tax increases would be borne by the top 20% of households. The top 1% — those who make more than $837,000 — would see their tax burden jump by nearly $300,000, a roughly 17% reduction in after-tax income.

Still, all households would see at least a small tax hike in the first year of Biden's plan. Those with the lowest incomes would see an average increase of $30, or about 0.2% of their after-tax earnings. However, TPC found that the increase is an indirect result of raising taxes on corporations, rather than direct changes to rates or benefits for individuals. 

On the business side, Biden has pledged to raise the corporate rate from 21% to 28% — a measure TPC estimates would raise a whopping $1.3 trillion. Doubling the rate on certain types of foreign income would bring in another $309 billion. 

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Some businesses could get a boost under Biden's tax plan, however. For example, his plan would restore the full electric vehicle tax credit and provide new incentives for manufacturing in distressed communities.

Still, the price tag on Biden's plan is sure to be dwarfed by Sanders' sweeping proposals to impose new taxes on the wealthy. The nonpartisan Penn Wharton Budget Model estimates Sanders' wealth tax alone could raise as much as $3.3 trillion. That proposal would impose a new tax of up to 8% on households with a net worth of more than $32 million.

TPC plans to release its analysis of plans from Sanders in the coming weeks.