Biden’s tax plan could lead to a combined rate of 62% for those making more than $400k – the highest increase in three decades
- Taxpayers in California, New Jersey and New York who earn more than $400k a year could face combined state and local income tax rates of more than 60%
- Tax payers would be unlikely to pay the full rate after various deductions, credits, offsets and loopholes worked through by accountants
- There is currently a $10,000 cap on state and local tax deductions which Democrats could push to remove should they win the senate
- Biden would also raise taxes on corporations by raising the corporate income tax rate and imposing a corporate minimum book tax
- The Biden tax plan by 2030 would lead to about 6.5 percent less after-tax income for the top 1 percent of taxpayers and about a 1.7 percent decline for all
The highest earners in the states of New York, New Jersey and California could end up paying 62% in state and federal under Democratic presidential nominee Joe Biden’s tax plan in what would be the highest tax rate implemented in more than 30 years.
The high rate would affect those earning more than $400,000 whilst those earning below that level would likely receive tax cuts.
Nonetheless, the rate would still see a double-digit increase on current tax rates.
Under Joe Biden’s tax plan taxpayers in California, New Jersey and New York who earn more than $400k a year could face combined state and local income tax rates of more than 60%
In California, the state and federal tax rate could rise to 62.6% according to calculations by the Tax Foundation, a Washington, D.C.-based think tank that collects data and publishes research studies on tax policies in the US.
On the east coast, in New Jersey, the combined rates would also likely be above 60% and about 58.2% in New York City where most of the state’s highest earners reside.
The current top U.S. statutory tax rate is 37% with the average earner in the highest tax bracket paying 26.8% after help from their accountants.
The Biden campaign has responded by saying that the ‘effective rates’ are more significant than statutory rates.
There is currently a $10,000 cap on state and local tax deductions which Democrats could push to remove should they win the senate
The statutory tax rate is the rate imposed by law on taxable income that falls within a given tax bracket while the effective tax rate is the percentage of income actually paid by an individual or a company after taking into account tax breaks, including loopholes, deductions, exemptions, credits and preferential rates.
Biden’s plan would see the effective tax rate for the top 1% increase to 39.8% from 26.8%.
The highest earners in California and New York City would be lumbered with effective state and federal tax rates of around 53%. Currently they pay around 40% in effective rates.
If Democrats manage to win the Senate they may also be able to pass legislation that would remove a $10,000 cap on state and local tax deductions enabling the tax rate for the highest earning members of society to be even lower.
Despite such promised, it would still see combined tax rates at their highest level for more than 30 years, according to MSN.
Tax payers would be unlikely to pay the full rate after various deductions, credits, offsets and loopholes worked out by accountants
The top marginal tax rate would rise from 37% to 39.6% with an additional 12.4% payroll tax according to Jared Walczak of the Tax Foundation.
In California the highest income tax rate for those earning the most would be 62.64%.
New Jersey would see a combined rate would be 58.2% while in New York it would be even higher at 62%.
The rates could rise even further if tax hikes placed upon employers are passed along to their workers.
Walczak suggests that the top combined rates might soar to more than 65% in California, 62.9% in New Jersey and 64.7% in New York.
‘These rates would be the highest in about 3½ decades,’ said Walzcak, ‘and imposed on a broader tax base than was in place previously.’