Exclusive: Biden's $400,000 tax cap for individual earnings, not joint filers
President Biden's promise not to raise taxes on Americans who make less than $400,000 only applies to individuals — not married couples filing jointly, a White House official clarified to Axios on Wednesday.
Why it matters: The declaration means a hypothetical couple, with each spouse making $399,999, would not escape the tax increase even though they individually earn less than $400,000.
- Their combined income would be $799,998, which the White House believes is sufficient to help underwrite the expanded social safety net the president is proposing.
Driving the news: Biden plans to raise the top tax rate to from 37% to 39.6% for families with taxable income above $509,300, and for individuals above $452,700, to help fund his $1.8 trillion American Families Plan, the official said.
- That $509,300 limit means that two married individuals, who each have a taxable income exceeding $255,000, would see the portion of their earnings above that figure taxed at the highest rate.
What they're saying: “Consistent with the president’s campaign proposal, we are proposing to reverse the tax cut for the top bracket by returning that top tax bracket to what it would’ve been under pre-2017 law,” the White House official told Axios. “That applies to less than 1% of Americans — the very top earners.”
- “In 2022, those pre-2017 brackets are expected to be about $452,700 in taxable income for a single individual and $509,300 in taxable income for a married couple,” said the official.
- The top 1% would would owe an an average of $260,000 more per year under Biden's proposal, according to an analysis by the Urban Institute's Tax Policy Center.
Flashback: Throughout the 2020 campaign, Biden repeatedly said “nobody” or “no one” making less than $400,00 would pay higher taxes.
- “Nobody making under 400,000 bucks would have their taxes raised, period, bingo,” Candidate Biden told CNBC in May.
The big picture: In the lead-up to the rollout of the tax package, Biden officials have given different answers as to whether the president's $400,000 campaign pledge would apply just to individuals or to married couples, as well.
- In selling his tax proposal during the campaign, Biden made the case for returning to pre-Trump tax levels — but only for the top bracket.
- Campaigns officials were strategically vague as to whether the threshold would apply to married couples and households or individuals.
- In response to detailed questions from Axios, the White House clarified its position on Wednesday evening.
Go deeper: Biden also plans to tax capital gains as regular income for households making more than $1 million.
- They would be taxed at a 43.4% rate.
The bottom line: The clarity from the White House will be welcomed not just by couples but tax planners and accountants, who were not entirely certain what Biden was proposing.
- The cost could be increased difficulty in passing legislation, since some Democrats in high-income areas will have to explain to voters who individually might make less than $400,000 that their family could still be subject to Biden's tax hike.
- Democratic lawmakers from the Northeast's tri-state region, where local taxes also are high, are already pressing Biden to lift the so-called SALT limits on state and local taxes.