Dems proposal could mean higher taxes for middle-income workers
House Democrats unveiled a comprehensive do-Hike this week plan that dramatically raises rates paid by wealthy Americans and corporations – but the proposal could also have long-term implications for the middle class.
The proposal would roll back key parts of Republicans’ 2017 tax law, including restoring the top personal income rate to 39.6%.
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According to a copy of the legislative framework, the new rate would apply to single individuals with taxable income of more than $400,000. It also applies to married individuals filing jointly whose taxable income is above $450,000; For heads of households with incomes over $425,000; Married individuals to file separate returns over $25,000; and over $12,500 for estates and trusts.
The plan also includes a 3% surcharge on income over $5 million and carries a 3.8% net investment income tax.
a distribution analysis A release Tuesday by the nonpartisan Joint Committee on Taxation found that taxes would increase for the top sliver of households in the first year the increase was implemented. But over time, the average tax rate for low-income earners will go up as well, once the child tax credit is extended.
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The analysis shows that by 2027, the average tax rate for individuals earning between $50,000 and $75,000 will climb by about 1%. The rate will be slightly higher, with an increase of 1.3% for individuals earning between $75,000 and $100,000. For those making between $100,000 and $200,000, the tax rate would increase by 1.5%, with a 1.5% increase.
The analysis shows that by 2031 the average rates for those income groups will be even higher.
Still, the increase appears to contradict Biden’s campaign promise that anyone earning less than $400,000 would not pay higher taxes if elected.
Biden told ABC News earlier this year, “Anyone making more than $400,000 will see a small to significant increase in tax.” “If you make less than $400,000, you won’t see a dime in additional federal tax.
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Assuming that the proposal becomes law — which hinges on a deeply divided Congress — the new tax rate will begin to go into effect during the 2022 tax year. According to an estimate by the Joint Committee on Taxation, it will generate an estimated $2.1 trillion over the next decade.
The top rate is currently paid by single individuals earning more than $518,401 and married individuals filing jointly who earn more than $622,051.
The increased child tax credit is set to expire next year, although Democrats are hoping to include a five-year extension as part of a $3.5 trillion tax and spending bill that, when enacted, will replace the social safety net. will expand dramatically.