Democrats’ reconciliation bill breaks Biden’s middle class tax pledge
During the 2020 campaign, Joe Biden and Kamala Harris promised over 50 times that they would not raise any tax on any American making less than $400,000 per year. But now, Democrats are pushing a multi-trillion-dollar socialist reconciliation bill that violates the pledge.
They claim it will cost nothing because it is “paid for” by tax increases that won’t harm the middle class or those making less than $400,000 per year. This is false. The legislation costs trillions of dollars over the next decade and will harm working families and many Americans making less than $400,000 per year.
Working families are already seeing tightening budgets and higher prices under President Biden. Consumer prices have increased by 5.4 percent over the last 12 months, a rate significantly higher than when President Biden took office, when consumer prices had increased by just 1.4 percent in the past 12 months.
Gasoline has increased by 42.1 percent in the past year, meat has increased 12.6 percent, and televisions have increased by 12.7 percent. Children’s footwear has increased 11.9 percent, bacon has increased by 19.3 percent, and fresh seafood has increased by 10.6 percent.
While Americans making less than $400,000 are already feeling the effects of this inflation, Biden and Democrats have proposed multiple tax increases that will directly impact these families.
For instance, Democrats want to raise the corporate tax rate so that our rate is higher than China and Europe. Corporations will not bear the cost of these tax increases but will pass it along to working families in the form of higher prices, fewer jobs and lower wages. The Joint Committee on Taxation estimates that 25 percent of the corporate tax falls on workers while the Tax Foundation estimates that 70 percent of this tax is borne by labor.
The left-of-center Tax Policy Center concluded that Biden’s budget would result in higher taxes for 74.1 percent of middle income-quintile households. By 2031, the TPC found that 95 percent of this income group will see a tax increase due to the expiration of middle-class tax cuts and corporate tax increases.
This means that workers will be hundreds of billions worse off from the tax hikes being pushed by Democrats. Similarly, a 2020 study by the National Bureau of Economic Research found that 31 percent of the corporate tax falls on consumers.
The corporate tax increase will also erode the life savings of Americans that have their life savings invested in 401(k)s, IRAs and the stock market. Eighty to 100 million Americans have a 401(k), 46.4 million households have an individual retirement account and half of Generation-Zers and Millennials are invested in stocks.
Democrats have also proposed a $97 billion tax increase on tobacco and reduced risk tobacco alternatives. This tax increase will overwhelmingly hit low- and middle-income Americans. According to JCT, 77.5 percent of this tax will be paid by those making less than $100,000 per year, while 94.3 percent will be paid by those making $200,000 per year.
Biden and Democrats have proposed giving the IRS the authority to collect the account inflows and outflows for bank, loan, and investment accounts as well as Venmo, CashApp, and PayPal accounts.
The Biden administration has proposed subjecting every account exceeding gross inflows and outflows of $600 to this proposal, while Senate Democrats have suggested a threshold of $10,000. Anyone with a job, a mortgage or a rent payment will get snooped on. The IRS would automatically seize and store the data, likely forever.
Working families making less than $400,000 per year will be impacted by this proposal and will be the target of IRS targeting auditing and harassment.
House Democrats have also proposed new taxes on American energy, including a “starter” carbon tax on methane, while Senate Finance Chairman Ron Wyden (D-Ore.) recently said he is developing a trillion-dollar full carbon tax. Either proposal would violate the Biden middle class tax pledge and increase the costs of gasoline, household energy bills and everyday consumer goods.
Democrats and President Biden claim that their massive multi-trillion dollar tax and spend plan will tax “the rich” and profitable corporations while leaving middle-class Americans unharmed. In reality, the Biden tax plan will impose significant tax increases and new audits on American families making less than $400,000 per year.
Working families will see fewer jobs, higher prices, lower wages and reduced life savings under the Democrats’ tax hike plan.
Alex Hendrie is Director of Tax Policy at Americans for Tax Reform.
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