The Biden tax plan

A big hike? Not so much and not on the bottom 95%

America First Action, one of the “dark money” super PACs supporting Donald Trump, is running a massive advertising campaign in swing states accusing Joe Biden of planning to raise taxes “by $4 trillion, hitting all income groups and affecting nearly every taxpayer in America.”

Biden’s rejoinder, repeated at his Town Hall meeting on ABC, is that no one earning less than $400,000 a year will get hit with a tax increase.

A new analysis from former journalist Howard Gleckman of the Tax Policy Center, a joint effort by the Urban Institute and Brookings Institution, shows both assertions in the pro-Trump ad are false. The government’s increased tax take over the next ten years will only be $2.4 trillion, an increase of just 0.9% of gross domestic product (GDP).

Moreover, taxpayers bearing the brunt of the tax increase will be those in the top 5% of earners. The bottom 80% of the population will get a tax break under the Biden plan. Only people in the top 1% of earners will absorb a significant hit to income. Here’s the relevant chart:

It’s also important to put that $2.4 trillion “tax hike” in context. By raising the share of GDP taken in taxes by less than 1%, the Biden plan only raises the total take to about 17% of GDP. That’s still well below the peak of the last 40 years, which came in the late 1990s when full employment under President Clinton raised the tax take to nearly 20% of GDP.

Here’s another chart, this time from the St. Louis Federal Reserve Board (the final year is 2019):

Finally, a significant share of the new revenue will come from changes in corporate tax law. That should raise the total share of national income going to wage-and-salary workers, which has fallen or stagnated in every decade except the 1990s.

Again, here’s the relevant chart from the St. Louis Fed:

So here’s the bottom line on the Biden tax plan: It will raise taxes on corporations and the very well-to-do; it will redistribute income from the top 10% to the bottom 80%; and it will still leave the federal government with plenty of fiscal capacity to invest in combating global warming, modernizing infrastructure and improving the living conditions of average Americans.

Trump, during his Town Hall meeting on NBC, promised he’d deliver a tax cut for middle-class Americans after the election. He said the same thing in 2018 before the mid-terms. He has yet to introduce legislation. Nor has the Republican-led Senate shown any interest in tax reform over the past two years.

Their plan is obvious. The GOP’s goal is to continue pursuing their now four-decade-long agenda of shrinking the size of government to the point where, as anti-tax crusader Grover Norquist once famously put it, you could drown it in a bathtub.