The increase would be used to help pay for the $1.9 trillion pandemic stimulus package — called the American Rescue Plan — which Biden signed into law Thursday.
The planned increases reportedly include raising the corporate tax from 21% to 28%, increasing the income tax rate on people making over $400,000, expanding the estate tax, paring back tax preferences on pass-through businesses such as limited-liability companies, and setting up a higher capital-gains tax rate for individuals making at least $1 million.
The tax hike, the first such measure since Bill Clinton’s overhaul in 1993, will likely include repealing former President Donald Trump’s 2017 tax law, which benefited corporations and wealthy individuals, Bloomberg reported, citing sources.
West Virginia Sen. Joe Manchin told The Hill in January that repealing Trump’s tax cuts while the pandemic continues to weigh on the economy would be “ridiculous,” though his stance has eased a bit since then. He said last month that “everything’s open for discussion.”
From 1979 to 2019, the wealthiest 1%’s share of pre-tax income jumped from about 11% to 19%, according to the World Inequality Database, maintained by Gabriel Zucman, an economist at the University of California, Berkeley, and other experts on inequality. And that group’s share of wealth — including real estate and stock portfolios — surged from roughly 23% to 35% in the same period.
“To further reduce inequality, Congress would need to increase taxation at the top end — in particular, the taxation of wealth and capital income,’’ Zucman said. “There is a real risk, otherwise, that wealth concentration, which has surged over the last four decades, will keep rising in the post-COVID world.’’
Bloomberg reported that in addition to funding key initiatives, including providing more help for poorer Americans, the planned tax changes would address what Democrats deem as inequalities in the tax system.
“His whole outlook has always been that Americans believe tax policy needs to be fair, and he has viewed all of his policy options through that lens,” former Biden economic aide Sarah Bianchi told Bloomberg. “That is why the focus is on addressing the unequal treatment between work and wealth.”
A date for an announcement has not yet been set, Bloomberg reported, but the White House has said the plan would follow the signing of the coronavirus relief bill.
The Associated Press contributed to this report.