Some earners would find themselves in a higher bracket if they get married
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The president 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.
Last week, White House press secretary Jen Psaki told FOX Business’ Blake Burman that the threshold would also be $400,000 for individual filers.
Psaki gave the same answer when asked for clarification by a reporter on Monday.
Individuals who earn 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. That means some individuals may wind up being hit with the tax hike because they are filing jointly – whereas, if they filed as individually, they would not be above the specified threshold.
“It’s a significant disadvantage to married couples,” Timothy McGrath, managing partner of investment advisory firm Riverpoint Wealth Management, told FOX Business. “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, McGrath noted, 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,” McGrath explained. However, two individuals earning $200,000, who are filing jointly, would be.
Under the proposal, the top rate would increase to 39.6% from 37%.
The White House indicated that the president is open to negotiating his tax proposals as part of a broader discussion with Congress on paying for his infrastructure proposal.
“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,” Psaki said. “But he also believes that we have an opportunity to rebalance, to take to address our tax code that is out of date and add some could pay more in our country that are not currently.”
In addition to raising income taxes on the wealthiest individuals and households, the administration has floated raising the corporate tax rate to 28% from 21%.
Psaki said on Monday that the White House had not seen evidence from economists that the increase was likely to be a drag on growth, but once again indicated Biden was open to hearing revenue-raising suggestions from Congress.