President Joe Biden’s Build Back Better agenda would raise taxes on up to 30 percent of middle-class families, despite his campaign promises not to hike taxes on anyone making under $400,000 per year, according to a new analysis.
“Taking into account all major tax provisions, roughly 20 percent to 30 percent of middle-income households would pay more in taxes in 2022,” an analysis published late Thursday by the non-partisan Tax Policy Center found.
However, the report highlighted the tax increases would be “small.”
“Among those with a tax increase, low- and middle-income households would pay an additional $100 or less on average. Those making $200,000-$500,000 would pay an average of about $230 more,” it said.
Over time, though, that tax burden will change, according to the analysis of the $1.75 trillion proposal currently before the House of Representatives.
In 2023, the proposed expansions of the Child Tax Credit payments would end and the corporate minimum tax on book income, which is one of the largest proposed tax hikes in the bill.
The Tax Policy Center said this will hit families indirectly by limiting companies’ return to shareholders, which include workers and those investing for retirement.
A proposed increase in the nicotine tax could also increase tax burdens across all income brackets.
“In general, the combined effects of these changes would result in many households paying higher taxes in 2023 than in 2022. They would shrink the average 2023 tax cuts for low-income households, raise taxes slightly for moderate-income households, and increase taxes significantly for the highest-income households,” the Tax Policy Center said.
Meanwhile, another part of the proposal that would increase the deduction limit on state and local taxes — popularly known as SALT deductions — would benefit wealthy families in high-tax states like New York and California, while providing almost no benefit to the middle class, according to the analysis.
“Despite what its promoters say, raising the cap to $80,000 would provide almost no benefit for middle-income households. It would reduce their 2021 taxes by an average of only $20,” the analysis said.
“Even those making between $175,00 and $250,000 would get a tax cut of just over $400 or about 0.2 percent of after-tax income. By contrast, the higher SALT cap would boost after-tax incomes by 1.2 percent for those making between about $370,000 and $870,000 (the 95th to 99th percentile),” it added.
The analysis was based on a Nov. 3 copy of the proposed bill, although the proposal could still change during negotiations.
At the same time, the proposal would also give a big-time tax break to the rich.
Household earnings $1 million or more per year could pay $25,900 less in taxes, a tax break almost 10 times greater than households earning between $50,000 and $100,000, which would pay $2,600 less, based on the sample family of four, according to a separate analysis by the nonpartisan Committee for a Responsible Federal Budget.