Biden's American Families Plan Comes With a Big Tax Hike. Here's Who Could Pay More
Ahead of his first speech to a joint session of Congress on Wednesday, President Joe Biden unveiled the American Families Plan, a wide-ranging proposal with a hefty price tag aimed at expanding the social safety net. Expanding the Child Tax Credit and establishing programs for universal pre-school, free community college, paid family leave and more would cost an estimated $1.8 trillion.
Biden wants to pay for his package by raising taxes — specifically, by enacting "a set of measures to make sure that the wealthiest Americans pay their share," according to a White House fact sheet. But the very thought of higher taxes, especially in the middle of a pandemic, is still enough to make the average person worry.
Will Biden's plan affect your income taxes? Which tax hikes is he suggesting? And why do people keep talking about capital gains? Here's what you need to know.
Are taxes going up?
If Biden's proposal passes, yes. Some people will see higher taxes.
The American Families Plan suggests increasing the top individual tax rate from 37% to 39.6%, the level it was before former President Donald Trump signed the Tax Cuts and Jobs Act in 2017. (FYI: The lower rate would have expired anyway in 2026 unless Congress stepped in.) The idea is to "reform the tax code so that the wealthy have to play by the same rules as everyone else," according to the fact sheet.
Biden's push to increase the capital gains tax rate is a bigger, buzzier change, says Mike Savage, CEO of 1-800Accountant. Biden wants to make it so that households earning more than $1 million pay the same rate on profits from selling their investments, aka capital gains, as they do on wages.
