Biden’s infrastructure plan will not impose any individual taxes for the time being. What you need to know
President Joe Biden speaks with Vice President Kamala Harris after meeting his Covid-19 Response Team at the White House on March 29, 2021.
Jonathan Ernst | Reuters
President Joe Biden on Wednesday unveiled his latest plan to boost the post-coronavirus economy – a $ 2 trillion infrastructure package called the American Jobs Plan.
In it, the president calls for billions of dollars for transportation infrastructure, the care of the elderly and disabled, drinking water infrastructure, housing, manufacturing, and job development and training.
To raise the money, Biden suggests raising the corporate tax rate, cracking down on companies that outsource profits, and removing tax breaks for some industries. With the tax increases, the measure would pay for itself in 15 years and then reduce the deficits, according to the White House.
The proposed taxes do not currently affect individuals. Still, there could be personal tax increases in the future, especially for high earners.
“This initial proposal does not really address individuals and individual taxation laws,” said Megan Gorman, attorney and managing partner at Checkers Financial Management in San Francisco. “It’s only a matter of time, though.”
Will my taxes go up?
Currently, Biden’s proposal does not include tax increases for individuals – it is only aimed at companies.
However, this does not mean that certain individuals should not prepare for tax increases in the future. There are other legislative proposals that would increase taxes on high-income Americans.
“Biden has consistently stated that he wants to raise tax rates for Americans who earn a certain amount of money in this country,” Gorman said. “This is how high earners and other wealthy private individuals prepare.”
And of course the White House said, “The president will come up with additional ideas in the coming weeks to reform our tax laws to reward work, not wealth, and to ensure that the highest income earners pay their fair share.”
More from Invest in You:
For a few days, some companies cost thousands of PPP loans
Disabled Americans could save their incentive money in this account
Op-ed: Black women have to do their own magic with their finances
This Wall Street veteran wants to bring diversity to the American company
For example, Sen. Elizabeth Warren, D-Mass., And Sen. Bernie Sanders, I-Vt., Recently proposed the Ultra Millionaire Tax Act, which would impose a total annual tax of 3% on assets over $ 1 billion and more 2% provides. annual wealth tax of more than $ 50 million. Other proposals would target capital gains and the goods of the ultra-rich.
This would also affect how wealthy families might seek to lower the estate taxes payable and how they pass their wealth on to future generations.
Many families in this group have acted in anticipation of higher taxes and a change in estate tax over the past year, Gorman said.
“There is always creative planning available to wealthy families,” she said. “What this has done for wealthy families has forced many of them to be very proactive in implementing their wealth transfer strategies.”
What will change for companies?
Taxes for companies would rise according to Biden’s plan. Many of the provisions of the proposal are a reversal of measures that cut taxes on large corporations in former President Donald Trump’s 2017 Tax Cuts and Employment Act.
The proposal would increase the corporate tax rate from 21% to 28%. The minimum tax paid globally on multinational corporations would increase from around 13% to 21%, and tax enforcement against US companies claiming tax havens because their headquarters are increasing would increase.
The plan would also end federal tax breaks for fossil fuel companies. If passed, these changes would be permanent and could only be reversed or revised by further legislation.
Biden has consistently stated that he wants to raise tax rates for Americans who earn a certain amount of money in this country.
Lawyer and Managing Partner, Checkers Financial Management
Will there be more tax changes?
It is likely that there will be additional changes to tax legislation that will affect high earners.
For middle- and low-income Americans, tax hikes are likely off the table, as Biden has said taxes won’t go up for families earning less than $ 400,000 a year. Instead, Biden worked on expanding the tax credits for this group.
For example, the latest coronavirus package has expanded the child tax credit and made payments on a regular basis with the hope that families will receive them monthly for 2021. Payments could start as early as July.
“This is a big social change that they are making with a tax credit,” Gorman said. “Here we hope that more American families will begin to build up their cash reserves.” She added that if you are eligible for the balance, now is the time to plan what you will do with that money.
Of course, Biden’s current proposal could change as it makes its way through Congress, where it will likely have to be approved by both Democrats and Republicans.
Additionally, it’s important to remember that many of the cuts in Trump’s 2017 tax plan will expire after 2025, which means some individual tax rates would rise again thereafter unless Congress expands the legislation. Most of the business provisions of the law are permanent.
REGISTRATION: Money 101 is an 8-week financial freedom learning course delivered to your inbox weekly.
CHECK: How to make money doing creative side businesses, from people making thousands on sites like Etsy and Twitch Grow with acorns + CNBC.
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.