Joe Biden’s vow Friday not to increase taxes on anyone earning less than $400,000 a year conflicts with his platform, according to outside tax experts.
“The tax policy proposals that he has already put forth would violate that promise because he is already proposing to raise taxes on households that earn less than $400,000,” said Kyle Pomerleau, a resident fellow at the right-leaning American Enterprise Institute.
Biden told CNBC on Friday that “nobody making under $400,000 would have their taxes raised. Period.”
But the Biden plan would, in fact, hit taxpayers earning much less.
Pomerleau said the plan Biden released late last year includes tax increases that kick-in at roughly $160,000 since it caps itemized deductions at 28% for all taxpayers. That provision means filers in higher tax brackets suffer a tax increase.
For example, under Biden’s proposal, single filers earning more than $163,300 in 2020 could only deduct 28% for itemized expenses even though they are in a 32% tax bracket. This equates to a 4% tax increase because without the limitation, they could have taken a 32% deduction.
“That [$163,000] income level is far below the $400,000 threshold he’s talking about,” Pomerleau said.
Biden’s proposed corporate tax hike to 28%, from 21%, would also lower take-home pay for households, according to Erica York, an economist with the Tax Foundation think tank. The proposal wouldn’t be a direct tax on households, though. Instead, higher corporate taxes are generally thought to translate into lower wages for workers, to some extent.
All levels of income would be likely be affected, with the lowest 20% of earners receiving a 0.5% reduction in take-home pay in 2021, in the Tax Foundation’s projections.
“The pledge to not raise taxes on anyone making less than $400,000 doesn’t square with many of the ideas Biden has proposed on the campaign trail already,” York said via email.
An increase in the corporate tax rate could also negatively affect portfolios, such as 401(k) plans, since after-tax incomes would be lower and likely hurt stock prices.
“If you are a part owner of a corporation, and to the extent that corporations pay more tax, you are going to pay more tax,” Pomerleau said.
