The former vice president likes to say that nobody making less than $400,000 would see their taxes rise under his plan. This is misleading, because along with a series of taxes on affluent individuals, Biden would also significantly raise taxes on businesses, which are not just owned by the wealthy. Given the broad ownership of stocks via 401(k) retirement plans and pension funds, his new tax burdens would threaten the wealth of most American households.
And of course virtually all workers feel the impact of a slowing economy. In April the Tax Foundation reported that the Biden plan would reduce take-home pay for workers up and down the income scale. The Tax Foundation added that “Biden’s tax plan would reduce the economy’s size by 1.51 percent in the long run. The plan would shrink the capital stock by 3.23 percent and reduce the overall wage rate by 0.98 percent, leading to 585,000 fewer full-time equivalent jobs.”19
Dan Clifton of Strategas Research figures the Biden plan to raise the corporate income tax rate will reduce the earnings per share of the S&P 500 by 11 percent. Mr. Clifton explains: “Dividends are taxed twice: first at the corporate level and then when distributed at the individual level. This is important because Biden is proposing to raise the corporate tax rate from 21 to 28 percent and tax dividends at the ordinary income level for those making over $1mm per year. The tax increases raise the effective tax rate on dividends from 40 to 60 percent.”20
Mr. Clifton notes other disincentives to operating U.S. businesses: “Just the prospect of the Biden tax plan being implemented will encourage companies to consider the sale of their businesses. Under the Biden plan, the capital gains tax rate is nearly doubled from 20 percent to 39.6 percent. The after-tax rate of return on the sale of the business is much higher this year compared to next year if the tax plan is implemented.”21
Why does Biden keep moving to the left on economic policy? Not everyone thinks he needs to excite the socialist “Bernie Bros” to get elected. Michael Tesler writes at the website FiveThirtyEight that “while Biden voters may not be all that excited about voting for Biden, they’re very enthusiastic about voting against Trump” (emphasis in the original).22
But the Biden camp clearly believes they need to gin up more enthusiasm for their candidate, or they wouldn’t be working so hard to please the activists who swooned over Sanders. That’s why Biden rolled out that new $2 trillion proposal to counter climate change, both more expensive and more ambitious in the pace of mandated changes than the plan he backed during the Democratic primaries.
Yet Democratic voters picked him over Mr. Sanders precisely because they did not want revolutionary change. Voters across the political spectrum have been sending the same message ever since. A July CNBC poll found a lead of 10 points for Biden, but also a warning against adopting a radical agenda. Voters who participated in the CNBC survey clearly don’t want what Mr. Sanders has been selling. A full 54 percent of them express an unfavorable view of socialism, compared with just 29 percent who view it favorably. Similarly, 54 percent have a favorable view of capitalism, while just 27 percent express an unfavorable view.23
Another recent addition to the Biden agenda is an effort to mimic Trump trade policy by reducing imports, at a cost to Americans of $700 billion. Mr. Biden is now promising the costs of trade disputes, but with none of the pro-growth Trump tax and regulatory reforms that resulted in the best job market in American history prior to the virus.
Speaking of Trump tax reform, the corporate income tax rate reduction was a game changer for American competitiveness, but the 2017 law also lowered rates for individuals in every tax bracket. If a new administration repeals the Trump reforms, the people noticing immediately will not just be the wealthy. Phil DeMuth, author of The Overtaxed Investor: Slash Your Tax Bill & Be a Tax Alpha Dog, says, “To see what a good deal we have now, let’s look at the numbers. A married couple filing jointly shows $78,000 of ordinary income, their current marginal rate is 12%.” But if the Trump tax cuts disappear, this couple’s marginal rate “will more than double, to 25%,” he adds.24
The repeal of Trump tax reform would bring especially bad news for retired people. According to DeMuth, “If you receive $30,000 from Social Security and have $36,000 of other income, you will be taxed at a marginal rate of 46%, even while supposedly being in the 25% tax bracket (because of the nutty way Social Security is taxed). In some cases, your tax rate can go as high as 56%. More people will experience rising tax rates throughout retirement—first gradually, following the accelerated required minimum distributions from their retirement accounts, and then suddenly, when the first spouse dies and the survivor has to file as a single taxpayer.”25
And there are more Trump reforms at risk, says DeMuth; “The Trump tax reform doubled standard deductions, such that far fewer taxpayers still bother to itemize.… Remember the Alternative Minimum Tax, which made you do your taxes twice, under two completely different tax regimes, and then pay whichever was greater? That annual ritual has all but disappeared,” but it would come back to life without the Trump law. DeMuth adds that “the qualified business income deduction, which lets eligible small-business owners deduct up to 20% of their income,” would also go away.26
What would be the cost of a Biden presidency? This depends on just how much of the Sanders agenda Biden wants to enact. The tax increases Biden has already announced would collect much more from taxpayers than simply repealing the Trump tax reforms. But if Biden wanted to pay for all the spending Bernie Sanders promoted as a candidate last winter, even adding another zero to the $4 trillion Biden tax
