How would Joe Biden’s tax proposals impact your tax liability?

In our recently updated analysis of Joe Biden’s tax proposals, we found that the Biden plan would raise federal revenue by $2.8 trillion over the next decade. Almost a quarter of that new revenue would come from individual income and payroll tax increases that fall primarily on high-income households.

To supplement our analysis of Biden’s tax proposals, we have created a web application using the Policy Simulation Library’s open-source Tax-Cruncher that allows users to explore how Biden’s tax plan would impact their federal tax liability.

U.S. Democratic presidential candidate Joe Biden speaks during a drive-in campaign event at Dallas High School in Dallas, Pennsylvania, U.S., October 24, 2020. REUTERS/Kevin Lamarque

Users can specify demographic information, the number and
age of dependents, the level and composition of income, and any itemizable
expense that a taxpayer may report. The app then allows you to see how Biden’s individual,
payroll, and corporate tax reform proposals would impact different taxpayers
under different assumptions. And since the tax code is scheduled to change over
the next decade, we also allow you to choose a year between 2021 and 2030 to
analyze.

The app provides a detailed breakdown of a given taxpayer’s
taxable income, individual income and payroll tax liability, and the value of
any tax credits they may qualify for under both current law and Biden’s
proposals. It also shows an estimate of the taxpayer’s share of corporate tax
liability that falls on their capital income (capital gains, dividends,
interest, and business income) and labor income.

For example, the app can explore how Biden’s plan would
impact the 2021 tax liability of a joint filer that makes $75,000 in yearly
wage income and has two children under six years old (Figure 1). The
application shows that Biden’s proposals would zero out our hypothetical
taxpayer’s income tax liability and actually provide a net income tax refund of
$1,590 for a total income tax reduction of $3,200, net of refundable credits.
This taxpayer’s payroll tax liability would remain the same at $11,480, and
this taxpayer would face a slight, indirect tax increase of approximately $311
from the corporate income tax.

Figure 1. Basic Tax
Liabilities for a Hypothetical Taxpayer, 2021

  Current
Law
Biden
Plan
Change
Individual Income
Tax
$1,610 $—1,590 $—3,200
Income Tax
Marginal Rate
12% 12% 0%
Employee +
Employer Payroll Tax
$11,480 $11,480 $0
Payroll Tax
Marginal Rate
15% 15% 0%
Corporate Tax
Incidence (Wages)
$218 $529 $311
Corporate Tax
Incidence (Capital)
$0 $0 $0

Source: Authors’ calculations using the Tax-Cruncher-Biden application.

In addition to tax liability calculations, the application
creates a series of interactive charts that allow you to explore how a
taxpayer’s average and marginal income and payroll tax rates would change if their
earnings (or a different income measure of your choosing) were to vary (as
shown in Figure 2). Similarly, the app generates other charts that show how
total income and payroll tax liability and credits, such as the Child Tax
Credit, Child and Dependent Care Credit, and the Earned Income Tax Credit,
would vary by income.

Figure 2. Tax Rates by Taxpayer Earnings, 2021

Source: Authors’ calculations using the Tax-Cruncher-Biden application.

This application allows one to explore many aspects of how
Biden’s plan would impact tax liabilities, but no tool is perfect. It excludes
some more complex provisions in the tax code to ease useability and does not
capture every possible variable. Above all, the app is educational and should
not be used for tax preparation purposes.

You can access the web application here.

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