In an effort to sell their massive tax-and-spend package, President Biden and congressional Democrats have publicly pledged not to increase taxes on those making less than $400,000. True to form, though, that line has been crossed by several provisions that would burden lower- and middle-income families at a time when they’re struggling to recover. Here are some examples:
Individual Tax Increases: According to the non-partisan Congressional Joint Committee on Taxation (JCT), the Democrats’ bill would backload tax increases on Americans making as little as $40,000. In 2023, 59% of those earning between $200,000 and $500,000 will immediately be hit by tax increases. Every income level above $40,000 will see a tax hike starting in 2027, a clear violation of Biden’s pledge.
Corporate Increase: On its face, the return of a graduated corporate income tax with a proposed top rate of 26.5 percent dee seems to increase taxes on the highest-earning companies. However, economists from across the spectrum have long warned that the burden of increasing taxes on corporations will ultimately be shared by workers in the form of lower wages. While modeling the effect of a 25-percent corporate tax rate, the JCT estimated that within 10 years two-thirds of the burden would be shouldered by those making less than $500,000. (Sec. 138101)
Oil and Gas Tax Hikes: As Democrats move reconciliation to increase taxes, they are also working to push through a flurry of reforms to advance the Green New Deal. Their legislation will change leasing rules and raise royalty rates for drilling. When taken together with the new carbon tax push and Democrats’ generous subsidies for green energy, it’s clear that the intent is to increase the price of fossil fuels – hurting consumers – and to regulate oil and gas companies – and the jobs that they provide – out of existence.
Tobacco Tax Increase: The Democrat proposal would double the tobacco excise tax, a burden that would disproportionately fall on lower-income Americans since smoking is more prevalent among those with lower incomes, and a tax on tobacco would chip away a larger share of their income. Because the proposal would also apply the tobacco excise tax to vape products, it effectively sets a pernicious trap for smokers who otherwise might have sought a healthier (and less expensive) alternative to smoking. The tax increase would also impact the bottom line of community small businesses like convenience stores, vape shops, and gas stations, 61 percent of which are immigrant-owned. (Sec. 138504)
Carbon Tax: Though not yet included in draft legislation, top Democrats are engineering a carbon tax plan that could raise up to $900 billion in new revenue. The proposal, however, threatens to run afoul of their pledge not to increase taxes on those making under $400,000: a carbon tax could disproportionately affect lower- and middle-income Americans by increasing the price of fossil fuels and taxing consumers buying gas at the pump or paying their electric bills.
Inflation Nation: One of the biggest risks of Democrats’ spending package is driving further inflation. American families are already feeling the effect of higher prices for everyday items and necessities, with inflation increasing 5.3 percent over the last 12 months. Federal Reserve Chairman Jerome Powell has warned about the upside risks to inflation, telling lawmakers that “inflation is elevated and will likely remain so in coming months …” Inflation is the top economic concern among voters, including among those at or near retirement who are concerned that lower buying power will chip away at their savings.