The draft budget that the president Biden introduced last week includes several tax increases on the ultra-rich and corporations that would push the highest US rates on individual and corporate income to the highest level in the developed world, according to new analysis published by the Tax Foundation. non partisan.
The Biden team’s proposal would raise the average top tax rate on personal income to 57.4%, the highest rate in the 38-member Organization for Economic Co-operation and Development.
The president introduced a series of tax increases, including a “Billionaires’ Minimum Income Tax” that would place a minimum 20% tax on all American homes worth more than $100 million, or about 0.01 % of Americans.
Under the proposal, the highest bracket of American households would be required to pay a tax rate of at least 20% on their total income, or the combination of income from wages and what they have earned in unrealized earnings. If a billionaire is not paying 20% of their income, they will have to make an “extra payment” to make up the difference to meet the new minimum.
The White House projected that more than half of the revenue generated by the tax would come from the country’s 700 billionaires.
Biden also proposed raising the corporate tax rate from 21% to 28% as part of his budget request and introduced a global minimum tax designed to crack down on offshore tax havens. Arizona Sen. Kyrsten Sinema has previously said she will not support a corporate tax increase.
On top of that, the top marginal tax rate on ordinary income is already scheduled to increase from 37% to 39.6% in 2026, when parts of the Republicans’ 2017 tax law expire. Biden’s budget also assumes his massive spending bill, the Build Back Better plan, becomes law.
That plan included a series of tax increases, including a 5% surcharge on modified adjusted gross income (MAGI) above $10 million, plus a 3% charge on MAGI above $25 million, for a total increase in 8%, which equates to about a 9.1% tax rate on taxable income, the analysis shows.
The Build Back Better plan would also close tax code provisions that allow some wealthy taxpayers to avoid paying the 3.8% Medicare surcharge on their earnings by strengthening a net investment income tax for anyone who earns more than $400. 000.
That means the federal top marginal personal income tax rate would increase to 51.4% in 2026, or about 52.5% based on taxable income.
That rate doesn’t even take into account state income tax, which most Americans pay (only eight states don’t tax income). The average top marginal state-local tax rate is about 6%, according to the Tax Foundation, which would mean the top combined personal income tax rate would be about 57.4%. That is higher than any rate currently applied in a developed nation.
Japan and Denmark are currently tied among OECD nations for the highest maximum income tax, at a rate of 55.9%. They are followed by France (55.4%), Austria (55%) and Greece (54%).
Currently, the US has a top combined rate of 42.9%.