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