How Could Biden’s Tax Increase Proposals Impact You in 2021?
Biden’s tax increase proposals target C corporations that pay corporate income taxes and pass-through businesses, like sole proprietorships, partnerships, or S corporations, that pay individual income taxes. Those business taxes are eventually carried by U.S. citizens, including business owners and workers. Biden’s proposals would generally raise business income taxes by over $2 trillion in 10 years.
Corporate Tax Increases
Biden’s proposals seek to increase corporate tax by approximately $1.7 trillion in 10 years. According to economists, capital income will initially bear the weight of corporate taxes before it’s uniformly distributed between capital and labor income with time. They also predict that the proposed corporate tax raise would increase the average tax amount for every taxpayer in every state.
The average tax increase would be between $416 per taxpayer in West Virginia and $1,490 per taxpayer in Massachusetts in 2022. The average tax increase for each taxpayer in West Virginia would be $760, while that for each taxpayer in Massachusetts would be $1,729 in 2031.
In 2022, ten other states other than Massachusetts would register average tax increases of more than $1,000 for every taxpayer. The number of states with an average tax increase of over $1,000 per taxpayer would increase to 34 by 2031.
Increasing Pass-Through Business Income Tax
The new tax increase proposals seek to raise around $220 billion in pass-through business income within 10 years. These proposals would increase tax burdens in each state based on the total pass-through business income that each state reports. In 2022, a taxpayer in West Virginia and New York will see an average tax increase of $32 and $154 respectively.
Raising Capital Gains and Dividends Tax Rate
The proposed tax changes would raise the capital gains and dividends tax rate for households earning over $1 million from 37% to 39.6%. Taking into account the Net Investment Income Tax of 3.8% that was imposed on investment income during President Obama’s tenure, the maximum federal capital gains tax rate would rise to 43.4%. The proposal would lead to a tax burden increase in every state over time.
Resolving an IRS Tax Debt
The best way to resolve an IRS tax debt is by filing current tax returns and coming up with a reliable plan to repay the outstanding taxes. Seeking tax debt help from a tax law attorney who has a stellar record of handling IRS tax debt problems is also a great idea.