A key takeaway from the ongoing presidential election campaign, aside from disturbing news and circus-style debates, is that former vice president and Democratic presidential nominee Joe Biden, if elected, would undo Trump’s corporate tax breaks and leniency for the wealthy.
Biden’s tax plan, just announced, proposes the 12.4% Social Security tax to kick back in for incomes above $400,000, and it’s also proposing to return the top bracket rate to the Obama-era’s 39.6% rate from its current 37% rate.
The $400,000 threshold is much higher than the $250,000 income threshold proposed by the Obama administration back in 2008 when that administration attempted to raise taxes on the wealthy.
In its analysis of the Biden plan, Wharton School of Business noted that people with adjusted gross incomes at or below $400,000 would have a 0.9% average decrease in after-tax income, while people making that threshold would see a 17.7% after-tax income drop.
Biden’s tax plan wouldn’t affect many people, since those making $400,000 represent the top 1.8% of taxpayers earning about 25% of the nation’s income.
According to the latest data from the U.S. Census Bureau, the real median household income was $68,700 in 2019, up 6.8% from the year prior. However, considering all those lost jobs and the fact that some of those who are still employed are now working fewer thanks to the pandemic, those numbers may be smaller this year.
At the same time, we learn that earning $400,000 per year doesn’t necessarily classify you as “rich”. On the contrary, especially for those living in certain U.S. cities, such as New York and Los Angeles, $400,000 doesn’t go as far as you might think.
Living a “modest life” with an income of $400,000 would leave a middle class family about $34 left in the bank after all expenses, according to Financial Samurai, a popular blogger, speaking to CNBC.
“A middle-class lifestyle is defined as: owning a home, having two kids, saving for retirement, saving for college, going on modest vacations several weeks a year, and retiring in one’s early 60s,” blogger told CNBC
For the past 12 months, Americans have been paying 4.1% more for food, according to the latest U.S. Bureau of Labor Statistic's monthly Consumer Price Index (CPI) report. Prices have inflated since the start of the pandemic and there are no signs it will return to the pre-pandemic level even once it is over.
The cost of living in the U.S. rose 30% over the past 13 years. Food and housing costs climbed 36% and 32%, respectively. Education costs rose 26% during that period. U.S. student loan borrowers, which number around 45 million, own a collective $1.6 trillion in federal and private student loan debt.
According to the Federal Reserve's latest numbers, the average American household carries $137,063 in debt. Yet, consider that the U.S. Census Bureau reports that the median household income was just $63,179, suggesting that many Americans are living beyond their means.
Most Americans live paycheck to paycheck and the country’s workforce has grappled with wage stagnation for several decades.
Recent research by the Brookings Institution found that over the last 40 years, wage growth for typical American workers has been extraordinarily weak.
The data shows many Americans have not seen a significant rise in that time, with hourly wages at the middle of the income distribution has grown only 12% between 1979 and 2018 when adjusted for inflation.
So, while the 1.8% making over $400,000 a year may lash out at a Biden’s planned reversal of Trump’s corporate tax breaks, with a clear site set on generating money from the wealthy, most Americans wouldn’t be affected. But many of those same Americans don’t seem to be preparing to vote with their pocketbook in mind. The level of polarization in American in 2020 transcends taxes, by far.
By Fred Dunkley for Safehaven.com
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