Old and busted Biden: No one making under $400,000 will get a tax hike! New Biden hotness: No single person earning under $400,000 will get a tax hike! Axios’ Hans Nichols reports that Joe Biden will propose a tax hike that will begin on joint filers with combined incomes of $509,300, which makes hash of his oft-offered campaign promise to exclude those earning below the presidential-salary level:
President Biden’s promise not to raise taxes on Americans who make less than $400,000 only applies to individuals — not married couples filing jointly, a White House official clarified to Axios on Wednesday. …
Biden plans to raise the top tax rate to from 37% to 39.6% for families with taxable income above $509,300, and for individuals above $452,700, to help fund his $1.8 trillion American Families Plan, the official said.
That $509,300 limit means that two married individuals, who each have a taxable income exceeding $255,000, would see the portion of their earnings above that figure taxed at the highest rate.
What they’re saying: “Consistent with the president’s campaign proposal, we are proposing to reverse the tax cut for the top bracket by returning that top tax bracket to what it would’ve been under pre-2017 law,” the White House official told Axios. “That applies to less than 1% of Americans — the very top earners.”
In other words, if two people earning $399,999 in 2021 remain single, the $799,998 they earn separately will avoid the higher tax rate altogether. If they get married, then $280,000 of those earnings will get taxed at the higher rate, even though nothing has changed except their marital status.
That is one hell of a disincentive to marry, and it’s an entirely peculiar disincentive at that. One can debate the wisdom of even having a category of “married filing jointly” as opposed to just having people file individual tax returns, but if the point is social engineering, why go against marriage? Marriage provides stability and accountability, legally as well as financially and in the sense of community. If there are any tax consequences to marriage, it should be positively aimed, not a disincentive.
The consequences of this will be predictable. It won’t be that people won’t marry, at least not in large numbers. Instead, people earning near these levels will simply switch to filing as individuals under the “married filing separately” status. That will essentially double the work of these couples, but a few hundred dollars to save several thousand dollars is a pretty easy calculation to make at tax time. The real cost will be on the IRS, thanks to the added filings that will flood them with extra work. Not only will the revenues of this tax hike fail to materialize, it will end up costing a ton of extra money to deal with the predictable outcome from the incentive that Biden will set up with this tax structure.
On top of all those considerations, this re-engineering of Biden’s tax pledge proves two other points. First, Biden didn’t actually do any calculations when he promised not to hike taxes below the $400K level, even though critics repeatedly pointed out that he couldn’t get anywhere near the revenue Biden needed for his ambitious tax-and-spend plans with that limitation. Second, it proves that his team still is flying by the seat of its pants in attempting to re-engineer this pledge rather than just admit that Biden lied about the depth of taxes needed to pay for his agenda.
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