This article is the third of a three-part series that walks readers back through Biden’s campaign platform to explore the incoming administration’s stance on Housing, Taxation, and Infrastructure, with the goal of exploring how these pre-election promises might translate into tangible federal policy.
As of Monday, November 23rd, Biden announced his nomination of former Federal Reserve Chairwoman Janet Yellen (D-New York) to become the next, and very first female Treasury Secretary (The WSJ). To those familiar with the decision, Yellen is an economist at the forefront of policy-making who will be given the responsibility of recovering the destruction that the COVID-19 pandemic has caused (The WSJ).
The nomination, and potential selection of Yellen is a necessary first step to achieve the proposed tax plan that has been at the forefront of Biden’s presidential campaign – forecasting a $3.3 trillion raise in revenue over the next decade due to the raised income level, capital gains, and payroll taxes.
What does this mean for you?
In alignment with Biden’s administrative stances regarding Housing and Infrastructure, the tax plan offers a variety of solutions to combat the long-term concern of income inequality, putting the interests of ordinary Americans over those of large financial institutions.
The stimulative measures in Biden’s plan ease tax burdens on low and middle-income families. Tax proposals within the comprehensive plan are categorized below:
Income Taxes
- Reverts the top individual income tax rate for taxable incomes above $400,000 from 37 percent under current law to the pre-Tax Cuts and Jobs Act level of 39.6 percent.
- Long-term capital gains and qualified dividends at the ordinary income tax rate of 39.6 percent on income above $1 million and eliminates step-up in basis for capital gains taxation.
- Phases out the qualified business income deduction (Section 199A) for filers with taxable income above $400,000.
Miscellaneous
- Itemized deductions cap tax benefit to 28 percent of value for those earning more than $400,000, which means that taxpayers earning above that income threshold with tax rates higher than 28 percent would face limited itemized deductions.
- Expands the estate and gift tax by restoring the rate and exemption to 2009 levels.
- Expands the Child and Dependent Care Tax Credit (CDCTC) from a maximum of $3,000 in qualified expenses to $8,000 ($16,000 for multiple dependents) and increases the maximum reimbursement rate from 35 percent to 50 percent.
Credits
The Biden tax plan includes homeownership tax credits which the real estate industry has supported due to the benefits of assisting first-time homebuyers and minority households. Proposed homeownership tax credits below:
- Continuing the New Markets Tax Credit to provide an incentive for investment in low-income communities.
- The US Department of the Treasury competitively allocates tax credit authority to intermediaries that select investment projects. Investors receive a tax credit against their federal income tax.
- Furthering the Low-Income Housing Tax Credit aimed to construct and rehabilitate affordable rental housing for low-income communities/ households.
- Tax credits are issued to state and territorial governments.
- Many types of rental properties are LIHTC eligible, including apartment buildings, single-family dwellings, townhouses, and duplexes.
- Re-establishing the First-Time Homebuyers’ (or “down payment”) Tax Credit, which was originally created during the Great Recession to help the housing market.
- Biden’s homebuyers’ credit would provide up to $15,000 for first-time homebuyers.
- Targeting subsidies to those who don’t yet own a home, including the young, who have recently struggled to build wealth, while benefiting Blacks and Hispanics, who respectively have only one-eighth and one-fifth the average wealth of Whites.
Due to threshold limitations implemented throughout the tax plan, those exceeding the $400,000 income threshold would not be included within the above credits.
Biden’s ability to execute his comprehensive tax agenda will fall in the hands of a divided Congress with elections held on Tuesday, January 5th. However, his determination of reducing taxes for low and middle-income Americans, as well as implementing housing related credits speaks for his anti-discrimination and affordable housing policies.