February 10, 2021

  1. Corporate and Business Taxes: Repeals the most egregious tax breaks in the 2017 Trump-GOP tax law (the Tax Cuts & Jobs Act, or TCJA). Increases the corporate tax rate from 21% to 28%, aims to reduce outsourcing and create jobs here at home, and reduces tax dodging from profit shifting to tax havens.
  2. Individual Taxes: Repeals excessive giveaways to the rich in the TCJA (such as a lower top tax rate and a weakened estate tax), caps the value of itemized deductions at 28%, and closes other loopholes that shield the wealthy from paying their fair share.
  3. Taxing Wealth Income More Like Work Income: Reforms how wealth and income from wealth is taxed by changing taxation of capital gains derived from the sale of assets (such as stocks, businesses, and real estate):
    • For those making more than $1 million, it raises the top tax rate on capital gains from 20% to 39.6% to match the top rate on wages and salaries.
    • Closes the loophole that lets the wealthy pass valuable assets, such as stock, to their heirs without paying taxes on the increased value of those assets.
  4. Strengthening Social Security: Requires the highest-income earners to contribute more to the system by levying Social Security payroll taxes on wages above $400,000. Currently, only wages below about $138,000 are taxed.
  5. Expanding Tax Credits: Substantially expands existing tax credits for working families and caregivers and offers low- and moderate-income families new tax credits for first-time home purchases, retirement benefits and green energy. Provides meaningful and effective business tax credits for domestic manufacturing, green energy and investments in low-income communities.

As strong as it is, the President-elect’s tax plan could be bolstered further with modifications that more completely fulfill the principles of his agenda. We recommend that the plan:

  • Better discourage corporate outsourcing by taxing the foreign income of corporations at the same rate as domestic income, not just narrowing the gap between the two rates. 
  • Close loopholes that let multinational corporations avoid paying their fair share of taxes by shifting profits offshore and that also promote the outsourcing of jobs; require public country-by-country disclosures of key financial data to determine profit shifting.  
  • Clarify that everyone making over $400,000 will pay the higher tax rates in effect before the 2017 tax law. 
  • Repeal the high-income “excess business losses” tax cut in the CARES Act, which was meant to provide pandemic relief not a windfall to millionaires.
  • Apply the principle of “taxing wealth like work” to those households making over $400,000, not just those making over $1 million to promote fairness and raise revenue.
  • Further strengthen the estate tax on wealthy families by taxing the largest fortunes at higher rates and end the generation skipping tax exemption for existing dynasty trusts after 20 years.
  • Specify real estate tax loopholes to close to curb sizable industry tax breaks. 
  • Apply Social Security payroll taxes on earnings above $250,000, rather than $400,000.
  • Significantly reduce the annual $600-billion plus tax gap through a comprehensive approach, including restoring funding levels to historic levels as a share of collections, and a multi-year investment to modernize the IRS’s technology
  • Make the fully refundable Child Tax Credit (CTC) permanent; extend the Earned Income Tax Credit (EITC) to all childless workers, not just those over 65

Beyond modifying the current tax plan, the Biden administration could more fully achieve tax fairness by expanding its agenda to include:

Additional Moderate Reforms

  • Restore much higher tax brackets and tax rates on the biggest incomes, so that millionaires and other super-wealthy pay higher rates than upper-middle-class families.
  • Establish a Millionaires Surtax: a simple and effective method of more fairly taxing the highest incomes that would impose a 10% surtax on couples making over $2 million and individuals making over $1 million.
  • Close or narrow costly business tax loopholes: end the ability of some wealthy business owners to avoid taxes funding healthcare programs; limit the deductibility of interest on business debt to 20%; reform how businesses account for advertising expenses; end manipulation of inventory accounting; and fully close the bonus-pay loophole.
  • Tax stock buybacks as income the way stock dividends are taxed.
  • Repeal or phase out the “Opportunity Zones” tax shelter.
  • Require that multinational corporations disclose key financial information publicly on a country-by-country basis to the Securities and Exchange Commission. 

Structural Reforms

  • Annually tax great wealth or at least the increase in that wealth—both of which currently go untaxed for years and sometimes forever—through a wealth tax or mark-to-market taxation of capital gains. 
  • Adopt a Financial Transaction Tax, a small sales tax on every trade, to raise significant revenue while curbing dangerous speculation.
  • Restructure and expand refundable family tax credits—EITC and CTC—to better support struggling families.
  • Replace current depreciation rules with economic depreciation.