Biden's Plan to Tax the Rich Faces Roadblocks
The president-elect is unlikely to get much on his wish list, with the Democratic majority in the House narrowed and the GOP likely keeping control of the Senate.
![picture of joe biden smiling](https://cdn.mos.cms.futurecdn.net/H4gwsPsaxsVt7e7UojmrR4-415-80.jpg)
President-Elect Joe Biden has big plans for tax changes. He campaigned on tax increases for corporations and individuals making over $400,000, estate tax hikes, and tax cuts for lower- and moderate-income people. But he's unlikely to get much on his wish list, with the Democratic majority in the House narrowed and Republicans likely keeping control of the Senate. This means no tax hikes on the rich.
Some say the legislative path will be easier for Biden if both Georgia Senate runoff races in early January result in Democratic victories. But even if that occurs, Biden is expected to wait to propose tax increases. Priority number one is COVID-19. Plus, raising taxes before the economy fully recovers is risky. It would also be hard to get higher taxes approved in a deeply divided Senate.
There is one exception, though. You might see some targeted tax hikes in an infrastructure bill to help defray the cost.
![https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png](https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-320-80.png)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Some Tax Changes are Possible
The chances of tax cuts for lower- and middle-income Americans are somewhat better, especially if the economy's recovery continues to leave these people behind. Biden wants to expand the child and dependent care credit and refundable child credit, both of which have bipartisan support. He also hopes to create a new tax credit for people who provide long-term care to their elderly relatives and to give a new tax break to first-time homebuyers and renters.
Among items that have a decent shot of passage early in the Biden administration:
- More stimulus, provided this doesn't pass during the lame-duck session;
- Expanding the employee retention tax credit;
- Reviving Paycheck Protection Program loans;
- Tax breaks for businesses to help cover the cost of making their premises safe for workers and employees;
- Tax incentives for IRA owners and 401(k) participants, along with proposals to encourage more employers to offer workplace retirement plans;
- Temporary tax extenders that expire at the end of 2020; and
- Tax breaks to encourage businesses to produce critical products in the U.S.
Tax Cuts and Jobs Act Provisions
Republicans will put pressure on Biden to make the 2017 tax reform law permanent. Most provisions affecting individuals expire after 2025, including the income tax rates, higher standard deductions and child credits, cutback in itemized deductions, 20% write-off for pass-through income, and higher estate tax exemptions. But some key business tax provisions will start to expire during Biden's term in office, such as first-year 100% bonus depreciation, which begins to phase out after 2022.
Biden will be in no hurry to act here. In fact, he wants to reverse the cuts that favor individuals making over $400,000. However, he might be more open to exploring expiring business tax changes, especially if he can get something in return.
What About Health Care Taxes?
Health care is vital to Biden. Shoring up Obamacare, adding a public option similar to Medicare, and increasing the health premium tax credit for individuals who buy health insurance through a government exchange are all on his list of to-dos. But expanding Obamacare would not get the needed Republican support.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Joy is an experienced CPA and tax attorney with an L.L.M. in Taxation from New York University School of Law. After many years working for big law and accounting firms, Joy saw the light and now puts her education, legal experience and in-depth knowledge of federal tax law to use writing for Kiplinger. She writes and edits The Kiplinger Tax Letter and contributes federal tax and retirement stories to kiplinger.com and Kiplinger’s Retirement Report. Her articles have been picked up by the Washington Post and other media outlets. Joy has also appeared as a tax expert in newspapers, on television and on radio discussing federal tax developments.
-
Visa Is the Worst Dow Stock Wednesday. Here's Why
Visa stock is down sharply Wednesday after the credit card company came up short of revenue expectations for its fiscal Q3.
By Joey Solitro Published
-
Another Analyst Moves to the Sidelines on Tesla Stock After Earnings
Tesla stock is spiraling Wednesday after the EV maker's big earnings miss and Wall Street has been quick to weigh in. Here's what you need to know.
By Joey Solitro Published
-
IRS Ends Inherited IRA Confusion: Annual RMDs Required for Many
IRAs The agency has resolved a major point of uncertainty for inherited IRA beneficiaries.
By Kelley R. Taylor Last updated
-
$145 Million in ‘Senior Freeze’ Checks Mailed
Property Tax What you need to know about New Jersey's property tax relief program for older adults.
By Kate Schubel Published
-
TaxAct Class Action Settlement: Details to Know
Tax Filing A multimillion-dollar settlement over alleged data privacy violations affects some TaxAct users.
By Kelley R. Taylor Last updated
-
An IRA Contribution Option You Might Not Know
IRAs Retirement savings might not have to take a back seat just because your partner doesn't earn income.
By Kelley R. Taylor Last updated
-
Project 2025 Tax Overhaul Blueprint: What You Need to Know
Tax Proposals Some people wonder what Project 2025 is and what it suggests for taxes.
By Kelley R. Taylor Last updated
-
The Taxes That Come out of Your Paycheck
Payroll Tax Your take-home pay is often less than expected due to several payroll tax withholdings you need to know.
By Kelley R. Taylor Last updated
-
Seven States Where Gas Tax Increased July 1
Gas Taxes Since July has arrived, drivers in several states are facing a gas tax hike.
By Kelley R. Taylor Last updated
-
401(k) Withdrawal Penalty Rule Changes for 2024
Tax Rules More people are taking early emergency withdrawals from retirement savings accounts. New rules might offer some relief.
By Kelley R. Taylor Last updated