While there is clearly some political realignment going on these days, one thing remains true: Republicans want to cut taxes, and Democrats want to raise taxes.
We have previously observed that Republicans have been so successful in cutting taxes over the last several decades that they will soon find themselves in a position where there aren’t many taxes left to cut.
But for Democrats, there seems to be an almost limitless vision for raising taxes.
Both Joe Biden and Kamala Harris promised to raise numerous taxes during the Democratic primaries. Biden’s promised tax increases total up to almost $4 trillion dollars over 10 years, according to the Tax Foundation. Kamala Harris’s tax increases were even more aggressive—her plans to pay for her promise of Medicare for All (which Biden rejected on the campaign trail) would have required trillions more in new taxes.
For starters, Biden would raise the corporate income tax from 21 to 28 percent, even though the country will need every possible pro-growth measure to recover from the Covid-19 pandemic. He would also impose a 15 percent minimum tax on corporations, which would also disincentivize business investment.
Kamala Harris, who undoubtedly would have significant influence in a Biden administration, promised a 35 percent corporate income tax rate.
Biden would also raise payroll taxes by raising the income cap on the 12.4 percent Social Security payroll tax. He would tax capital gains as ordinary income, which would significantly harm economic growth by punishing investment. Both Biden and Harris promised to raise the top marginal individual income tax rate from 37 percent to 39.6 percent. Biden also plans to cap itemized deductions for individuals, which is also a tax increase.
While one of the great accomplishments of Trump’s 2017 tax reform was fixing the problems that caused U.S. corporations to leave foreign profits overseas, Biden would take two steps backward by doubling the tax rate on global intangible low tax income from 10.5 percent to 21 percent.
Biden also plans to increase the estate tax, though not as dramatically as Harris, who also threatened to impose a 4 percent tax on all households earning more than $100,000 per year to pay for her Medicare-for-All plan. Harris would also slap a financial transactions tax on all stock, bond and fund transactions.
Both Biden and Harris proposed a slew of refundable tax credits for all sorts of situations, including low-income earners and green energy investments, for which Harris would also support a carbon tax.
While Biden’s tax increases may seem somewhat modest compared with Harris’s, they are by no means modest. In 2021 the economy will need pro-growth, not pro-government, policies to enable economic recovery. But the Biden/Harris ticket is promising the opposite.
August 26, 2020