WASHINGTON (AP) – Blow up a $ 3.5 trillion social spending bill Democrats hope to saveRepublican House Leader Kevin McCarthy said the legislation would violate President Joe Biden’s campaign promise not to tax Americans who earn less than $ 400,000 a year. It is technically precise but also misleading.
McCarthy also falsely suggested Thursday that a proposal by the Biden administration to help pay for the legislation by strengthening IRS tax enforcement would amount to spying on ordinary Americans.
A look at the claims and the reality:
MCCARTHY: “Joe Biden said, ‘No one earning less than $ 400,000 will have their federal taxes increased. It’s a lie: In fact, according to his plan, an average family earning over $ 50,000 will see a tax increase. – press conference Thursday.
BIDEN: “I give you my word as Biden: if you make less than $ 400,000 a year, I will never increase your taxes by a cent. But I’m going to get those at the top to start paying their share of taxes. – tweet on Sunday.
RONNA MCDANIEL, leader of the Republican National Committee, responding to Biden’s tweet: “This is not true – according to the Joint Committee on Taxation, Biden’s plan will raise taxes for families earning $ 50,000 or more per year.” – tweet on Monday.
THE FACTS: Biden’s commitment defies simple analysis. Republicans can legitimately denounce the president for violating his campaign pledge not to raise taxes for anyone earning less than $ 400,000. But Republican leaders also rely on a business model in which any tax that clearly targets wealthy businesses and shareholders can be interpreted as a tax hike for the middle class.
So let’s avoid politics and focus on what’s really going on here.
The Congressional Joint Committee on Taxation and other analysts use the idea of ”tax incidence” to estimate how much people are paying. It is a business model that bears the cost of tax changes. When companies face higher taxes, much of the cost is borne by shareholders. But some of the costs come at the expense of workers in the form of lower wages, and this is one of the main reasons Democrats’ policies can be described as raising taxes for the middle class.
Nearly 17% of taxpayers will pay more in 2023, including people earning less than Biden’s target, Joint Committee analysis shows. This is a function of the functioning of economic models, which rarely conform perfectly to the messages of political candidates. Biden’s tax policies are clearly designed to derive most of their income from corporations and the wealthy.
But is McCarthy correct that the average family earning $ 50,000 will see their taxes go up? Not enough.
The Tax Policy Center has published an in-depth analysis by income quintile. He revealed that the 40% to 60% of middle workers will get an average cut of $ 630. This is true even though 70% of the tax units in this group would benefit from a small tax increase of around $ 230 on average. How is it possible?
Well, the increases largely reflect how corporate tax hikes might cut wages. But Biden’s plan also includes an expanded child tax credit that would help households with dependents under the age of 18. The tax credit ranges from $ 3,000 to $ 3,600 per child. This credit only goes to people with children. The credits are so important that the whole translates into a tax cut for people who consider themselves to be in the middle class.
The Tax Policy Center’s analysis also makes it clear that the increases are targeting the wealthy. The richest 0.1% of earners are expected to an additional $ 1.1 million next year, enough to raise a total of $ 132.2 billion.
MCCARTHY: “Now Democrats want to spy on anything you earn or buy that is over $ 600. By hiring 85,000 new IRS agents to dig into all aspects of your life, Democrats want to enlist a bureaucratic army to achieve their goal of a socialist nation with big government. “
THE FACTS: This is an exaggeration. There is no espionage or monitoring of individual transactions as described by McCarthy.
As part of its efforts to tackle tax evasion by the wealthy, the Biden administration has proposed that banks annually report the total inflow and outflow of money from bank accounts greater than $ 600, or for accounts. containing at least $ 600. . But banks would not report individual transactions. The Treasury Department estimates that $ 600 billion a year is lost to tax evasion, the equivalent of all income taxes paid by the poorest 90% of taxpayers.
The Treasury Department explained that while most Americans see their wages reported to the IRS on W-2 forms, many high-income Americans receive income from legal or financial partnerships that often is not directly reported to the IRS. ‘IRS. This allows many wealthy Americans to avoid paying taxes that they would otherwise have to pay.
By receiving data on the total annual inflows and outflows from a bank account, according to the Biden administration, the IRS would have a better idea of who might receive significant income that it does not report.
The idea was one of many tax proposals Democrats considered to help foot the bill for social spending to invest in climate programs, child care and education.
The American Bankers’ Association opposed the plan, saying it would create unmanageable reporting burdens for the industry. House Ways and Means Committee chairman Richard Neal has suggested in recent days that Democrats may ultimately increase the reporting threshold from $ 600 to $ 10,000.
Associated Press writer Hope Yen contributed to this report.
Editor’s note – A look at the veracity of the assertions of political figures.
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