United States President Joe Biden speaks about the economy on May 27, 2021 at the Cuyahoga Community College Manufacturing Technology Center in Cleveland, Ohio.
Nicholas Comb | AFP | Getty Images
(For comparison, the highest individual tax rate of 37% applies to incomes over: $ 523,600 for single parents and heads of household, $ 628,300 for married joint applicants, and $ 314,150 for married separate applicants.)
According to the proposal, the top tax rate of 39.6% would come into effect in tax year 2022. (That means this would apply to tax returns filed in 2023.) Congress would still have to pass laws to pass the directive, which is not guaranteed.
Biden’s proposal is one of several measures aimed at increasing taxes for households making more than $ 400,000 a year.
The tax revenue would help fund social safety net expansion initiatives in the American Families Plan, including funding for an additional four years of free schooling, heavily subsidized childcare for middle-class families, government-paid family vacations, and expanded tax credits for children.
Increasing the top rate to 39.6% would raise an estimated $ 132 billion over five years, according to the Treasury Department.
The maximum rate is expected to rise even if Congress does not accept Biden’s proposal. The individual tax cuts of the Tax Cuts and Jobs Act will become obsolete after 2025 due to the design of the law by Congress.
Biden’s proposed income thresholds for the 39.6% rate are the same as pre-TCJA thresholds indexed for inflation, according to a tax official.