With both the Democratic and Republican National Conventions behind us, the 2020 election is finally, really, underway, ushering in the final sprint in a race for the White House with profound economic implications. After four years of President Trump, we have a clear sense of what he wants to do with our tax code – cut taxes for millionaires, billionaires, and corporations. Considering that the RNC declined to write a 2020 platform, it’s a safe bet that another four years of Trump would be no different, especially considering that his answer to the coronavirus crisis seems to be eliminating the payroll tax that funds Social Security and Medicare and cutting the capital gains tax rate.
The Biden tax plan, in contrast, takes tax justice seriously. It’s definitely not as aggressive as we would have liked, but it’s a good starting point. As the campaign season officially kicks off, we want to take this moment to examine where Biden’s tax platform succeeds and where it should go even further in creating a system that works for all Americans.
WHERE BIDEN SUCCEEDS:
- Biden plans to tax income from capital gains at the same rate as earned income for anyone making over $1 million annually. There is no reason that billionaire investors who let their money work for them should be paying a lower tax rate than ordinary people who work for a living. This change would ensure that all income, whether it comes from work or investments (how rich people tend to make their money), is taxed equally.
- Biden would recover $40 billion each year by eliminating the stepped-up basis, which lets rich families pass on billions without a significant portion ever being taxed. Currently, when someone inherits property or assets, the basis for assessing capital gains is “stepped up,” which means that all previous gains cannot be taxed, making this loophole a favorite amongst the wealthiest Americans. Check out our breakdown of how the stepped-up basis works HERE.
- Biden would reinstate a 12.4% payroll tax on earned income over $400,000. Under the current tax code, while 94% of Americans pay the payroll tax on every dollar they earn, the top 6% pays nothing on income above $137,700. Forcing high earners to pay the exact same rate as everyone else would raise up to $1 trillion to protect Social Security and Medicare over the next decade.
WHERE BIDEN COMES UP SHORT:
- The Biden tax code would raise the corporate tax rate from 21% to 28%. This is a move in the right direction, but Biden needs to go further, especially considering that the corporate rate was 35% under President Obama. Multinational corporations can afford to pay more and should be expected to pay more. One notable positive is that Biden’s plan would also close the carryforward loss loophole that allowed Amazon to make $11.2 billion in 2018 without paying any federal tax due to losses in previous years.
- Biden wants to increase the top marginal tax rate to 39.6%. He should go higher – potentially much higher. We need more tax brackets and much higher rates (approaching 70%) for those with incomes in the millions to tens of millions. At the very least, Biden should support a Millionaires Surtax, which would add a 10% surtax on incomes over $2 million and only impact the top 0.2% of earners. This would ensure that the ultra-rich – those who are more than able – pay their fair share of taxes. We also encourage Biden to consider a wealth tax on fortunes over $50 million, in order to appropriately tax those who have accumulated massive wealth but currently make little in income.
If Biden is elected president, he will face multiple crises that require bold, sweeping action. He must not squander the opportunity to correct the historic injustices baked into the tax code and to build a stronger – and more equal – economy in the process.