The Biden Administration's Tax Policies: How Will They Affect the Middle Class?

With the recent implementation of the "Build Back Better" plan, the Biden administration has introduced a series of policies that aim to address economic inequality. However, these measures have sparked debate over their potential impact on the middle class, particularly in light of the 2017 Tax Cuts and Jobs Act (TCJA). This article explores the implications of these tax reforms and assesses their potential impact on the middle class.

Understanding the 'Build Back Better' Plan

President Biden's "Build Back Better" plan, officially titled the Human Infrastructure Investment and Opportunity Act, seeks to stimulate the economy through significant investment in social programs and infrastructure. Critics argue that many of the proposed measures will have an inflationary effect, likening it to a hidden tax. The plan is expected to increase spending by trillions of dollars, financed primarily through tax increases on higher-income individuals and corporations.

Impact on Middle-Class Taxpayers

According to Pew Research, the middle class can be defined as households with annual incomes ranging from $40,000 to $126,000, depending on regional differences. Critics argue that the Biden administration's tax proposals primarily target the wealthy and corporations, with minimal impact on middle-class taxpayers. A significant portion of the 2017 TCJA benefitted the wealthiest 1 percent, with the Tax Policy Center projecting that 83 percent of the total benefits by 2027 would accrue to this group.

Rising Corporate Taxes and Inflation

Biden's agenda includes tax increases on corporate income. While proponents argue that these measures are necessary to fund social programs and reduce income inequality, opponents warn that corporations will pass these costs on to consumers through increased prices. This inflationary effect could disproportionately impact middle-class households, who are already grappling with rising costs of living for essential goods like food, gas, and healthcare.

Comparison to the 2017 Tax Cuts and Jobs Act (TCJA)

The 2017 TCJA was heavily skewed towards wealthy individuals and corporations, with limited benefits for average workers and small business owners. The majority of the benefits were projected to go to the top 1 percent. In contrast, the proposed tax increases under the Biden administration are intended to raise revenue to fund critical social programs, which could provide more direct benefits to middle-class taxpayers in the long term. However, the inflationary effect of rising corporate taxes could offset these benefits, leading to a net negative impact on the middle class.

Impact on Specific Income Groups

Bessie's proposal to provide tax deductions and monthly stimulus checks is another contentious aspect of the Biden administration's policies. For example, a family earning a medium salary of $50,000 in the southern states with two children would receive more money in refunds than they contribute to the system. This proposed policy, while intended to support working families, could potentially create a situation where beneficiaries receive more in government assistance than they earn, effectively reversing their tax contributions.

Conclusion

The impact of Biden's tax policies on the middle class is complex and multifaceted. While the proposed measures aim to address economic inequality, critics argue that they may have unintended negative consequences, such as increased inflation and higher costs for essential goods. The long-term effects of these policies are difficult to predict, and it remains to be seen how they will ultimately affect middle-class households.

Given the significant economic challenges faced by many middle-class Americans, policymakers must carefully consider the unintended consequences of their proposed tax reforms. It is crucial to weigh the potential benefits against the risks of inflation and increased costs for essential goods.