Sep 15, 2021 - Politics & Policy

Estimate: Revenues would drop before increasing under Dems' tax plan

Chairman Richard Neal, D-Mass., conducts the Ways and Means Committee markup of the Build Back Better Act in Longworth Building on Tuesday, September 14

Democratic Rep. Richard Neal, chair of the House Ways and Means Committee, which has submitted a draft proposal on raising taxes. Photo: Tom Williams/CQ-Roll Call via Getty Images

Democrats plan to raise $1 trillion over 10 years by making the federal income tax code more progressive. But they won't get the money quickly — their plan actually decreases total income tax revenues in 2023. And when the money does come, it will come from the very rich.

Why it matters: Estimates released by the bipartisan Joint Committee on Taxation on Tuesday show the House Democrats' plan raising $12 billion less than the current tax regime in 2023. But it will raise $133 billion more in 2029.

How it works: Taxes on the very rich would rise immediately, with taxpayers earning more than $1 million collectively paying just over $1 trillion in taxes, up from $908 billion under current law — an increase of 10.6%.

  • Americans making less than $40,000 per year would pay just $7.2 billion in federal income tax, down 90% from $72.3 billion under current law.
  • The top personal federal income tax rate would be 39.6%, up from 37%. Democrats also want to see an additional 3% tax on Americans who make more than $5 million per year.

The big picture: The income tax changes are a central part of the way in which Democrats are trying to raise the money to pay for President Biden's $3.5 trillion spending plan. They also want to increase the top capital gains tax rate to 25% from 20%.

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