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President Joe Biden’s proposed income tax increases for the wealthy would hit individuals earning more than US$452,700 in 2022 and married couples making at least US$509,300, according to a White House official.
The new top 39.6 per cent tax bracket, proposed in Biden’s “American Families Plan” on Wednesday, would encompass less than 1 per cent of taxpayers, the official said, asking not to be named to speak in more detail beyond the White House’s outline. The official’s comment suggested that the new rate, up from the current 37 per cent, would be applied from 2022.
“People file as married couples, they file as individuals, and his promise to the American people is that people who are in the 99 per cent of people who are making less than that are not going to have their taxes go up,” White House Press Secretary Jen Psaki said on CNN on Thursday.
The official’s comments are the most detailed yet on Biden’s income-tax proposal, after the administration for weeks said that no one making under US$400,000 would see their taxes rise. The proposal still faces months of negotiations in Congress, where Democrats hold a razor-thin majority.
Axios previously reported the income thresholds for the top tax rate.
The details mean the tipping point for an individual is even higher than the US$400,000 previously laid out. Psaki earlier Thursday, when asked if the US$400,000 threshold applied to families, responded, “That’s right, and individuals,” and didn’t specify that some filers above that also wouldn’t see a hike.
For Biden’s separate proposed increase in the capital gains tax rate to 39.6 per cent from 20 per cent, the administration said earlier this week that will apply to both singles and joint filers who make US$1 million or more.
The tax code has traditionally separated the income brackets for single and married filers to reflect the larger household size. Under current brackets, singles earning US$523,601 and up or couples making US$628,301 or more pay the top 37 per cent marginal rate.
President Donald Trump’s 2017 tax overhaul re-calibrated the tax brackets to lower levies for most filers at all income levels. The reshuffling also eliminated some long-standing problems for low and mid-income filers with what some call the marriage penalty -- couples paying more in taxes when they file jointly than if they were to file as two single adults.
A marriage penalty still exists for top earners: those earing between roughly US$628,300 and US$1 million will likely pay more in taxes as a couple.
The White House official said that the thresholds revert the top tax bracket to what it would’ve been before the Trump tax cut.