During this evening’s State of the Union (SOTU) Address, President Joe Biden is expected to repeat his mantra about increasing taxes on anyone earning more than $400,000 a year.
“Under his plan, no one making under $400,000 per year will pay more in taxes,” states the White House outline of the president’s speech.
Biden has repeated this chaunt several times during his tenure as president, but specifics on what $400,000 would be taxed has not been forthcoming. Would the tax be based on gross income? Taxable income? Joint filers? Single filers? Sales tax?
The use of “no one” in the White House’s outline suggests that the $400,000 threshold pertains to individuals, so, arguably, joint filers who both earn $399,999.99 would not see a tax increase.
Biden has also referred to individuals earning over $400,000 as being subject to the tax increase.
“And under my plan, nobody earning less than $400,000 a year will pay an additional penny in new taxes. Nobody,” Biden said in last year’s SOTU Address.
However, when the $400,000 mantra was first stated, then-Press Secretary Jen Psaki said that tax increases would affect families (aka joint filers) earning more than $400,000.
From the press conference where this occurred:
Q On the President’s interview, he said, on taxes, that ‘Anybody making more than $400,000 will see a small to a significant tax increase.’ To clarify, did he mean individuals or households? Because it wasn’t very clear. And Secretary Yellen, I think, has referred to ‘households’ before.
Q Families, okay.
Q Not individuals. Perfect.
This would mean that joint filers who both earn $200,001 a year would take a tax hit.
Questions about whether the tax increase would be based on gross income or taxable income have yet to be addressed. Most assume the levy would be based taxable income, since that is what shows up on 1040s. But others wonder if money siphoned into 401(k)s or other retirement accounts could be clawed back into taxable income for those earning over $400,000 to ensure that the “wealthy” pay their fair share.
Another question about the $400,000 threshold is whether it would apply to taxes beyond income. As the mantra (above) states “no one making under $400,000 per year will pay more in taxes.” It doesn’t state ‘more in income taxes.’
Tax increases on the sale of tobacco are incurred by individuals earning less than $400,000. Does a taxpayer earning less than this amount per year, but paying more in tax for purchasing cigarettes, break Biden’s rule? Also, are state tax increases prohibited for those earning less than the threshold?
These questions are unlikely to be answered in tonight’s address, and it might not matter.
Republicans control the House and are highly unlikely to support any tax increase proposed by Biden or any other Democrat.
The tax proposals that Biden is expected to propose in his speech tonight include:
- Quadrupling the tax on corporate stock buybacks.
- Minimum tax on billionaires (which could include taxing unrealized capital gains).
- Expanding the Child Tax Credit (Republicans have opposed this idea in the past).