H/T Town Hall.
The tax increase by Slow Joe The Gaff Machine Biden will destroy the self-employed sector of the economy.
Joe Biden has released his individual tax plan.
With respect to one of his most meaningful proposals, the limitation of the tax benefit of individual tax deductions to 28%, no one knows whether Joe is planning to increase or decrease federal taxes for wealthy New Yorkers or Californians. No one can say with certainty whether Mr. Biden is planning to reinstate the full deduction for state and local taxes (SALT) and limit its benefit to 28% or whether he is not planning to reinstate the SALT deduction. If he is reinstating the SALT deduction, the net impact will be that wealthy New Yorkers and Californians would see net federal tax decreases while wealthy residents of other states would see a net federal tax increase.
With respect to Joe Biden’s proposal to eliminate the cap on social security payments for high wage earners, this in conjunction with the return to the 39.6% top federal income tax rate would be a federal tax increase of 41% for every successful self-employed individual. (This regardless of whether there are SALT deductions or not.)
Perhaps Joe’s strategy is to let individuals make up their own minds as to what is in his mind. This can happen if there are no press conferences by the candidate.
If as proposed by Nancy Pelosi and Chuck Schumer, the SALT deduction is restored, the value of the reinstated deduction with a 28% value limitation is greater than the proposed top federal tax rate increase of 2.7%. (New York City: .28 x 10.73% = 3.00% & California .28 x 13.3% = 3.72%) Isn’t that just peachy, Texans, Floridians, and most others would see an increase in their net federal tax rates of 2.6%. New Yorkers and Californians would see increases in their federal income tax rates.
And there is the other side of the plan to limit the value of itemized deductions to 28%. With very, very rare exceptions, the maximum itemized deductions before charitable contributions are $32,500 (the current $10,000 limitation for SALT deductions plus about 3% times the maximum allowable home interest deductions). The standard deduction for a married couple is $24,800. So before the tax benefits from charitable deductions, the maximum cost of the 28% value limitation to a taxpayer would be just under $500.
What Joe has proposed at a time when schools, food banks, universities, hospitals, and all of the charitable institutions in the United States are trying to raise more money to increase necessary services is a disincentive to give to charity through an increase in the after-tax cost of giving to charity. The federal after-tax cost of that $100,000 gift to the local food bank would increase from $64,000 to $72,000. Would that decrease charitable contributions by the wealthy? Yes, it would.
And for the self-employed, Joe Biden has proposed a 41% tax increase on earnings over $400,000. The tax rate would increase from 37% to 52% before state taxes for all earnings over $400,000. (Additional self-employment taxes of 12.4% and an increase in the top income tax rate from 37% to 39.6%). If that law were in force in 2020, the winner of the U.S. Open in golf would see his federal income taxes grow from $810,000 to $1,150,000 from this single golf tournament.
When state taxes are added in, independent contractors and the self-employed could see tax rates of more than 65%.
Mr. Biden needs to hold a press conference to explain precisely what he has in mind with state taxes and why he thinks increasing the taxes of the self-employed by so much is a good tax policy.