A new analysis of Biden’s tax plans underscores this possibility in an intriguing way.
The analysis, by the nonpartisan Tax Policy Center, reaches two main conclusions about what would happen if all Biden’s tax proposals became law. First, the overall tax code would become more progressive than expected, in that wealthy earners would see a surprisingly significant tax hike.
Second, they would give a significantly larger financial lift to ordinary American families with children — via a tax cut — than you might have thought. Given that the “conservative populists” are supposed to support using the tax code to encourage family development, this would cut into their ideological turf.
The analysis seeks to calculate the distributional impact of all the tax changes in Biden’s multitrillion-dollar two-part economic blueprint, which includes a broad set of proposals to rebuild infrastructure, create jobs, and provide support for families, children and our caregiving economy.
The analysis looks at the impact of Biden’s proposals to increase various child tax credits and the Earned Income Tax Credit and raise tax rates on high-end incomes, capital gains and corporations, among other changes.
Taken all together, the impact would be stark. All the tax credits for lower- and middle-income people would really add up:
TPC projects that low-income households (making about $26,000 or less) would receive an average tax cut of about $600 or 4 percent of their after-tax income. Middle-income households (making between about $52,000 and 92,000) would pay on average about $300 less in taxes, or 0.5 percent of their after-tax income.
Meanwhile, all those tax hikes targeting the wealthy and corporations would also really add up:
Those in the top 1 percent would pay an average of about $213,000 more in federal taxes in 2022 while those in the top 0.1 percent (who will make $3.6 million and above) would pay an average of nearly $1.6 million more, or almost 17 percent of their after-tax income.
Meanwhile, because Biden’s plans are skewed toward tax credits for lower-income families with children, they would see a big benefit:
While all low-income households would get an average tax cut of about $620 in 2022, taxes for such families with children would plunge by an average of $3,200.
“This is an extremely progressive set of proposals,” Howard Gleckman, senior fellow at the Tax Policy Center, told me. “They raise taxes significantly on high income households and corporations, and cut taxes substantially on low and middle income households, particularly with children.”
The projected impact on low-income households with children — tax savings of over $3,000 per year — is striking.
“Biden is building on a long history of using these refundable credits as a way to help primarily working families with children,” Gleckman told me. “But Biden is making them much more generous.”
Now put this in the context of our debate over which party is really pro-working class. When Sen. Mitt Romney (R-Utah) surprised the political world by proposing a generous child tax credit, you would have expected conservative populist Republicans to support it.
After all, while progressives have long supported this policy, it’s also a solution that populist conservatives increasingly like. It involves tax cuts as opposed to direct tax-and-transfer payments, and addresses both child poverty and family instability, something right-populists are supposed to be preoccupied with. Yet certain leading conservative populist Republicans in the Senate panned it as welfare.
By contrast, Biden’s suite of policies would provide a large lift to those families.
“Conservatives who want to support working families with children want to use the tax code to provide them with a basic income,” Gleckman told me. “Biden is even more ambitious.”
In a sense, Biden’s policies appropriate both progressive and conservative populist instincts. The higher taxes on the rich and corporations — which would also reduce the privileging of investment income and rein in high-end tax avoidance, including by multinational companies — would discourage socially destructive elite conduct and make the tax code distributionally more progressive.
So would the low-end tax credits. Yet these wouldn’t just fulfill a long-held progressive priority; they would also steal away ideological turf that conservative populists have of late been trying to make their own.
Obviously these Biden plans are in proposal form, and it’s anybody’s guess how much will pass. But you’d think conservative populists who like to proclaim the GOP is becoming the real working-class party might look at these developments with a touch of alarm.