Workers don’t pay Social Security taxes on all of their earnings. Each year, there’s a wage cap that exempts earnings beyond a certain threshold. Right now, that cap is $142,800, and earnings in excess of that aren’t subject to a 12.4% Social Security tax. But Biden wants to implement that tax for wages over $400,000. To be clear, workers making over $400,000 wouldn’t pay Social Security taxes on earnings between $142,800 and $400,000. Rather, that added tax would come into play for earnings on top of $400,000.
3. A Higher Corporate Tax Rate
The Tax Cuts and Jobs Act lowered the top corporate tax rate from 35% to 21%. The Biden administration is seeking to raise that top rate to 28%. While this change wouldn’t affect individual taxpayers directly, it would likely trickle down to consumers indirectly in the form of higher-cost goods and services.
4. No More Tax Breaks On Long-Term Capital Gains For Wealthy
Investors who hold stocks for at least a year and a day before selling them at a profit get taxed at a more favorable rate than stocks held for a year or less. Long-term capital gains tax rates currently max out at 20% for the country’s highest earners, and most people pay 0% to 15% for long-term gains. Biden, however, wants to increase the long-term capital gains tax rate to 39.6% for those earning over $1 million. In doing so, he’d effectively negate the benefit of holding investments for longer than a year, since that 39.6% is, conceivably, what the richest would pay for short-term gains as well.