Taxes and the Future
With the upcoming election, I’ve been reflecting a lot on taxes and personal finance. One of the misleading things we’ve been hearing a lot this election is that Joe Biden will raise everyone’s taxes — this is not true. To me, it looks like Biden’s plan will support working parents, first time home buyers, individuals and businesses who are invested in renewable energy and our vulnerable and senior friends and family; whilst modestly increasing taxes for wealthy and established individuals.
Yes, he would increase tax for some individuals. To begin with, Joe Biden would institute 6.2% additional payroll withholding for those who earn — on payroll — over 400K a year as a single person, and another 6.2% on the employers’ side. This won’t affect individuals who earn more than 400K a year through rent, royalties, dividends and non-payroll income. This money will go towards the care and maintenance of our friends, neighbors and family who are older, living with disabilities, etc.
Additionally, when it comes up for review in 2025, Biden has said he will reinstate the top tax bracket (in 2020, this bracket includes individuals earning more than $518,400 and married couples earning more than $622,050 a year) to a 39.6% tax rate instead of the 37% that it is currently at. He will also cap itemized deductions to 28% of your total income if you earn more than 400K a year as a single person and slowly phase out the qualified business income deduction for single earners in the 400K+ per year category.
While Biden is instituting minor tax increases for the wealthy and well established, Biden is also doing a lot to reduce taxes for parents, first-time home buyers and other hardworking American taxpayers who are still establishing themselves. Biden will expand the child and dependent care tax credit from $3000 maximum currently to $8000 maximum (with a higher maximum for multiple dependents) and increase the reimbursement rate from 35% to 50%. As a response to COVID-19, in 2021 and ongoing as long as it is needed, Biden also proposes increasing the Child Tax Credit from the current $2000 max to $3000, with a $600 bonus credit for children under 6 years of age. He will also expand earned income tax credit for childless workers over 65 years of age, provide more renewable energy based credits to taxpayers in the USA and reestablish the First-Time Homebuyers’ Tax Credit, offering $15,000 towards your first home purchase.
On the corporate side, Biden will work to increase the corporate income tax from 21% to 28% and create an alternative minimum tax structure that can potentially increase some taxes for corporations who book over $100M in profits per year, though Biden has left intact the current ability for businesses to declare a Net Operating Loss and reduce their tax liability using foreign tax credits. In order to support the growth of businesses domestically, Biden will double the tax rate on foreign subsidiaries of US businesses and establish tax credits for companies manufacturing domestically whilst simultaneously imposing surtaxes on companies utilizing offshore manufacturing when they try to sell these products in USA. Biden will also help small business owners, manufacturing businesses and renewable energy businesses reduce their tax burdens with a variety of credits.
When faced with all this information, I do hear friends and family who note that it’s difficult to worry about climate change based economic policies when they are more concerned with the immediate safety and economic health of their families. I’ve also heard frequently the idea that “welfare makes people lazy” and that many would rather save their tax-dollars so they can invest in their own futures as they see fit because they don’t really see the benefit of welfare to those in our communities that utilize it.
I completely understand that when you have children, your priorities change. I can relate to feeling that climate change is not an immediate concern or may even seem like a hoax when our personal circumstances never see us facing tidal waves, unending smog for weeks from relentless wildfires, air pollution from vehicle emissions that yellows white clothes when you leave the house for just a couple hours, having to deal with hours of electric and water outages on a daily basis, or being forced to consume lead poisoned or bacterially contaminated water. I understand that for those who have been able to rely on familial support systems and haven’t encountered a system that structurally blocks you from advancement that it may seem like welfare is unnecessary and even damaging, and that for those of you who have other options than to rely daily on disability support services, public transport, public schools, public hospitals and the USPS that you may think your tax payer dollars can be better spent on personal matters.
However, I urge you to seriously think about whether your children really will be safer in a country where wealth inequity continues to rise, making their chance of succeeding slimmer and slimmer with each passing year. I request you to consider how easily it could be one of your kids who lost a spouse or home or business and faced financial ruin due to a hurricane or wildfire. You may not want to believe it, but science has proven that hurricanes are becoming more intense due to climate change, and that droughts and heat waves are increasing for the same reason. Denying or ignoring these facts will not change them, it will only leave us unprepared for the consequences.
Apart from all this, the costs of childcare, healthcare, nutrition and home ownership have risen exponentially along with the uncertainty regarding the state of the world we are bringing children into; and hardworking young folks my age who own only 3% of US wealth face more and more doubt about whether we can afford parenthood and the American dream despite all our efforts without relying on the support of our parents’, who owned 21% of US wealth when they were roughly the same age as we are now and enjoyed much better maintained public systems.
And while you may be a prudent individual who will reinvest your saved tax-dollars in building up the economy, either through supporting your family and children or by investing in social causes and making charitable donations, there are many who will be evading taxes without putting that money back into our economy at all, and in the worst situations, they will be actively destabilizing our economy by investing in foreign entities and moving the wealth away from USA altogether.
I understand that these are not easy issues to think about or discuss, but it’s so important to do so. The upcoming election is merely one milestone in a long path ahead for us to come together and rebuild USA equitably and sustainably. Building back trust in each others’ choices and building an accountable government after the past few years is not going to be a simple task, and it requires for everyone to express their desires and anxieties openly both to their friends and family and also to their local representatives. It also requires for us to listen to each other carefully and with open minds, and to come together to support each other on important causes using our votes.
Until we are all having the same conversation, focusing on facts and giving each other a fair chance to be heard with our hearts in the right place, we are going to continue to live in a very tense and difficult environment. And, as long as we remain so bitterly divided on issues, it’s going to be impossible to effect any kind of meaningful change at all. It’s on all of us to find a way to peacefully disagree, to open our minds to change and come together to work on what is most important to us so that we can actually manifest the progress we all want to see in the world.
It’s 2020. We can do better than having to justify our President making fun of people with disabilities, refusing to condemn white supremacy, and being a COVID super-spreader who lies about virtually everything. We need to do better than this, and it’s a good start even if that’s the only thing we can all agree on.