President Biden’s revenue plan by increasing Taxes includes Marriage Penalty

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Experts believe that US President Joe Biden’s plan to raise revenue by increasing taxes on higher-income individuals and households could penalize married couples. Biden has been clear all along that families earning up to $400,000 would not be the target of the tax hike. But, it was unclear whether there would be a lower income threshold for individual filers. The White House press secretary Jen Psaki informed Fox Business’ Blake Burman last week that the threshold would also be $400,000 for individual filers. On Monday, she provided the same answer when asked for clarification by a reporter. So, individuals earning a lesser amount could be affected, however, if they are part of a couple filing jointly that reports a cumulative income of $400,000 or more.

It clearly indicated that some individuals may wind up being hit with the tax increase because they are filing jointly. They would not be above the specified threshold if they filed as individually. A managing partner of investment advisory firm Riverpoint Wealth Management, Timothy McGrath said, “It’s a significant disadvantage to married couples. It’s another marriage penalty, and this is nothing new in the tax system. There are all sorts of tax marriage penalties right now. What would make this provision significant is that the proposed income threshold has the potential to affect a lot of households. Two individuals can make just under $400,000 and not be in the top tax bracket”. However, two individuals earning $200,000, who are filing jointly, would also be. The top rate would increase to 39.6% from 37% under the proposal.

The White House administration has indicated that President Biden is open to negotiating his tax proposals as part of a broader discussion with Congress on paying for his infrastructure proposal. Psaki said, “He’s going to have a plan to pay for it. I’m sure that if there are proposals out there that are different from his in terms of what they will cover, we’ll have that discussion. But he also believes that we have an opportunity to rebalance, to take to address our tax code that is out of date and add some could pay more in our country that is not currently”. The Biden administration has floated raising the corporate tax rate to 28% from 21%, to raising income taxes on the wealthiest individuals and households.