On the individual side, a Biden, if elected, would raise rates on high-income earners by
restoring the top rate to 39.6% from 37%, capping the value of itemized deductions at
28%, and restoring the Pease limitation on itemized deductions for those with taxable
income above $400,000.
Biden would also tax long-term capital gains and qualified dividends at ordinary income
rates on income above $1 million, and eliminate the step-up in basis for capital gains. He
would also phase out the Internal Revenue Code Section 199A qualified business income
20% tax deduction, enacted by the TCJA for individuals earning over $400,000.[2]
Despite the Section 199A deduction being preserved for the vast majority of small
businesses, its elimination will face significant opposition, even among Democrats. Small
businesses are the holy grail of American politics, and few lawmakers will be willing to pass
a measure that is perceived to hurt small businesses, especially in light of the economic
downturn. Moreover, determining how to phase out the Section 199A deduction will further
complicate an already complex statute.
Viewed together, based on currently released proposals, Biden would largely preserve the
TCJA's individual tax benefits and rate cuts for those with incomes less than $400,000. The
top 1% would largely bear the highest tax burden under the Biden plan — with the top 1%
of households seeing their after-tax income decline by about 16%, according to the Tax
Policy Center.
Despite several tax increases on high-income individuals, Biden does not embrace the
progressive platform of hefty wealth taxes for millionaires and billionaires. His platform also
does not include rhetoric on eliminating billionaires as a class.
If elected, Biden will face pressure from the left flank of the party to enact punitive taxes on
wealthy individuals to raise revenue for various spending proposals. Biden and other
moderate Democrats will continue to resist this push — for Biden, tax increases on high-
income earners are not a war on wealth, but rather a way to help working-class Americans.
Ultimately, it is likely that moderates in the Senate will prevail and the type of wealth taxes
championed by progressives will not pass.
To that end, Biden would use revenue generated from individual tax increases to pay for
enhancements to existing tax credits and to create new incentives that benefit middle-
income Americans. Biden's tax benefits for families fall into three categories: (1) assistance
for caregivers; (2) housing assistance; and (3) retirement benefits.
For caregivers, Biden's plan includes enhancing the child tax credit, from $2,000 for children
under 17 to $3,600 for children under 6 and $3,000 for all other children under 17; creating
a $5,000 credit for informal caregivers; and changing the child and dependent care tax
credit from $3,000 to $8,000 for one child, and from $6,000 to $16,000 for two or more, as
well as imposing a phase-out threshold at $125,000, completely eliminating the credit for
incomes above $400,000.
This is a departure from other Democratic proposals that, similar to current law, do not
impose income limitations on the child and dependent care tax credit. Biden's proposal
marks a major shift in tax philosophy — previously, the benefits of this tax credit went to
families across the income spectrum. A household of four with two children and $1 million in
income could still receive a $1,200 credit. As a result, the current credit value remains low,
barely making a dent in the true cost of child and dependent care expenses.