The American Family Plan is on its way. This week, President Biden is expected to roll out the third leg of his historically ambitious—and costly—domestic policy agenda. The proposal, which could cost as much as $1.8 trillion, is likely to create a family leave program, extend the more generous child tax credits included in the March relief bill, and extend higher premium subsides for health insurance purchased on the health exchanges. Biden is expected to pay for it by raising the top individual income tax rate, raising tax rates on capital gains, and taxing unrealized gains at death. He is expected to lay out details and defend the plan in a speech to Congress on Wednesday.
Reminder: If you’re not rich, you’re probably getting a tax cut this year. Politico reports on how much Congress has cut taxes for most Americans under recent Democratic-led legislation. The Joint Committee on Taxation estimates that those making between $75,000 and $100,000 a year will face a 1.8 percent average tax rate this year. Those earning less than $75,000 will, on average, owe no federal income taxes at all this year.
And, if you are rich, a SALT cap repeal will help you. TPC’s Howard Gleckman describes new TPC estimates of how repealing the federal $10,000 cap on state and local taxes (SALT) would be distributed among tax filers. Households making $1 million or more a year would receive half the benefit of repealing the $10,000 federal cap on the SALT deduction. Seventy percent of the benefit would go to those making $500,000 or more. The TPC analysis looks only at the distribution of the tax cut itself. Evidence of the cap’s impact on state spending is mixed and further complicated by the COVID-19 pandemic.
Manual processing of 29 million tax returns will delay some refunds. The National Taxpayer Advocate reports that the IRS is holding 29 million tax returns for manual processing. Some may need corrections due to the Recovery Rebate Credit, or verifications for the Earned Income Tax Credit or the Additional Child Tax Credit. These filers may have to wait longer than the average 21 days it usually takes for the IRS to process tax refunds.
Fill your TPC Prescription on Thursday. TPC’s Howard Gleckman will talk with David Bradbury, head of the Tax Policy and Statistics Division of the Centre for Tax Policy and Administration at the Organisation for Economic Co-operation and Development (OECD). Previously Bradbury was a member of the House of Representatives in the Australian Parliament and a minister in the Australian government. They’ll discuss fiscal policy responses to the pandemic from around the world. Learn more and register here for the noontime online event.
This week on the Hill. The Senate Finance Committee’s Subcommittee on Fiscal Responsibility and Economic Growth will hold a hearing tomorrow on creating opportunity through a fairer tax system. The full panel will hold a hearing on the tax code’s role in job creation and energy independence and affordability. On Thursday the full panel will hold a hearing on how the pandemic has affected delivery of Social Security benefits. Also Thursday, the House Ways & Means Trade Subcommittee will hold a hearing on advancing US economic competitiveness, equity and sustainability through infrastructure investments.
For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky at [email protected].
