Election 2020: Joe Biden's Tax Plans
With 24/7 COVID-19 coverage, it's sometimes hard to remember that this is an election year.
With 24/7 COVID-19 coverage, it's sometimes hard to remember that this is an election year. But we'll be voting (by mail?) in less than six months. That means President Trump and Joe Biden don't have much time to convince voters that they're more capable of getting us out of this coronavirus-induced economic mess than the other guy. And, since economic recovery will be front and center during the campaign, we know that tax policy will play a big role in the election, too. After all, any new economic initiatives will have to be paid for somehow, and that usually means tinkering with the tax code.
President Trump hasn't really talked much about second-term tax proposals. On the other hand, Biden issued several tax policy proposals during Democratic primaries. Once campaigning heats back up, he'll have to start promoting – and defending – those proposals again. But until that happens, here's a look at a few of the higher-profile Biden tax plans concerning hot button issues of the day. (We'll report on any Trump proposals when they are released.) Start brushing up now, so you'll know who to vote for in November.
Higher Taxes on Wealthier Americans
Unlike some of his opponents in the Democratic primaries (e.g., Elizabeth Warren and Bernie Sanders), Biden has not push for a "wealth tax." But that doesn't mean he is opposed to taxing the wealthy more heavily. For instance, to help close the income gap, he wants to raise the highest personal income rate back up to 39.6% (it was lowered to 37% by the 2017 tax reform law) and cap itemized deductions for the wealthiest Americans at 28%. He won't raise taxes for anyone making less than $400,000, though.
The former Vice President has also proposed eliminating the step-up in basis for inherited capital assets, which means more taxes on wealth passed to heirs, and ending favorable tax rates on capital gains for anyone making over $1 million.
Tax Breaks for Ordinary Americans
Taxing the wealthy isn't the only way to narrow the income gap. Reducing taxes for low- and middle-income taxpayers will help that effort, too. Along those lines, Biden has proposed:
- Expanding the childcare credit to $8,000;
- Forgiving student loan debt and excluding the forgiven amount from taxation;
- Expanding the work opportunity tax credit to include military spouses;
- Enhancing tax breaks for workers who are saving for retirement; and
- Creating tax credits for small businesses that offer retirement plans for their workers.
Biden never jumped on the Medicare-for-all bandwagon. Instead, he would rather keep and improve Obamacare. As part of his plan to do this, he would eliminate the income-based cap on the premium tax credit so that all families who purchase insurance through a health insurance exchange can claim the credit. He would also increase the credit amount by basing it on the cost of a gold-level health plan, rather than a less-expensive silver-level plan. In addition, Biden's health care plan would impose a tax penalty on pharmaceutical companies that increase drug costs by more than the rate of inflation and take away their deduction for advertising expenses.
Biden has also proposed several tax changes to help senior citizens and those who care for them. First, his plan calls for increased tax benefits for elderly Americans who pay for long-term care insurance with their retirement savings. As president, Biden will also allow low-wage workers over 65 years of age to claim the earned income tax credit (currently, you can't claim the credit if you're over 65).
To help protect Social Security, Biden would make more income from wealthier Americans subject to the Social Security payroll tax. (For 2020, wages above $137,700 are not subject to the payroll tax.) In addition, he would create a $5,000 tax credit for "informal" caregivers—family members or other loved ones—providing long-term care to the elderly. Caregivers would also be allowed to make "catch-up" contributions to retirement accounts.
Biden has issued a climate change plan that includes some tax provisions. His "Clean Energy Revolution" would be paid for by restoring the full electric vehicle tax credit (while aiming it at middle-class consumers), pushing tax breaks for energy efficiency, and increasing tax incentives for carbon capture, use and storage. He has also separately stated that he would support a carbon tax.
Biden's plan to expand access to affordable housing calls for creating a new refundable tax credit of up to $15,000 for first-time homebuyers. The credit would be paid when qualified taxpayers purchase a home, instead of when they file their tax return the following year.
He also wants to enact a new renter's tax credit to reduce rent and utility costs to 30% of income for low-income individuals.
The 2017 tax reform law dropped the corporate income rate from 35% to 21%. Biden wants to raise the rate to 28%. He has also called for a 15% minimum tax on large corporations.
The former Vice President has also called for repeal of the temporary net operating loss (NOL) provisions contained in the CARES Act. That law, which was passed in response to the coronavirus-induced economic meltdown, allows NOLs in 2018, 2019 and 2020 to be carried back for up to five years. It also suspends the 80% taxable income limit for utilizing NOLs for 2018 through 2020.
In addition, Biden wants to increase the global intangible low tax income (GILTI) rate on foreign profits from 10.5% to 21%.