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Biden wants to raise $1.5 trillion by taxing the rich. Here’s how


President Joe Biden addresses a joint session of Congress in Washington on April 28, 2021.

Melina Mara | Reuters

Taxes may soon be going up for the wealthy.

President Joe Biden aims to fund expanded education, child care, paid leave and other reforms by collecting more tax revenue from Americans who make more than $400,000 a year.

He would do so by raising the top income and capital-gains tax rates, changing the taxation of wealthy estates, closing so-called tax loopholes and focusing audits of the rich to prevent tax evasion.

All told, the American Families Plan would raise $1.5 trillion over a decade by taxing the highest earners, according to the White House.

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“I think you should be able to become a billionaire or a millionaire,” Biden told Congress Wednesday night in a speech outlining his agenda. “But pay your fair share.”

The richest 1% of taxpayers, who have an average income of $2.2 million, would shoulder the burden of the tax hike, according to an analysis published by the Institute of Taxation and Economic Policy.

Two-thirds of this group would see their taxes increase, by an average $159,000 a year, according to the analysis.

Of course, the proposal faces headwinds in Congress. Passage isn’t guaranteed and parts of the plan may change.

A new top tax rate of 39.6%

A doubling of the capital gains rate

Capital gains at death

“The exclusion here is high enough that it really is targeted at higher earners,” Watson said.

Family-owned businesses and farms would also get an exclusion — they wouldn’t have have to pay tax when the business or farm is passed to heirs who continue to run the business, according to the White House.

It’s unclear how Biden’s proposal to tax unrealized gains at death would interact with the federal estate tax, experts said. (For example, might taxes paid on unrealized gains be deducted from the size of the overall estate?)

“There are a lot of questions operationally how this might work,” Herzig said.

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