How would Biden’s corporate tax proposals impact taxpayers across states

The Biden administration has proposed several business tax increases, whether structured as C corporations subject to corporation tax or flow-through entities such as S corporations, partnerships, or sole proprietorships. subject to personal income tax. It’s important to remember that these business taxes ultimately fall on people, including business owners and employees across America.

Based on congressional district-level IRS individual tax return data, the Tax Foundation’s new interactive tax map shows how individuals across the country would be affected by tax increases.

Biden’s plans contain several tax proposals that in total would increase corporate income tax by more than $ 2 trillion over 10 years, including:

  • Increase in corporate tax
    • Increase the corporate tax rate to 28 percent
    • Raise Taxes on Foreign Income of U.S. Corporations
  • Passthrough activity increases
    • Impose a net investment income tax (NIIT) on transferred income over $ 400,000
    • Make the passthrough loss limitation active
  • Increase in personal income tax
    • Raise the top bracket of personal income tax to 39.6%
  • Increase in capital gains tax
    • Tax unrealized capital gains on death greater than $ 1 million and impose a tax rate of 39.6% on capital gains greater than $ 1 million

Proposal corporate tax increase are significant, amounting to about $ 1.7 trillion over 10 years. Economists generally find that the corporate tax burden rests on a combination of capital and labor income, and we assume that the burden rests largely on capital income initially and, in the long run, in a equal on capital and labor income. So, after spreading the proposed corporate tax increases over capital and labor income reported on personal income tax returns, we find that this would increase the average tax burden per filer in each state, with increases of Tax in 2022 ranging from $ 416 per filer in West Virginia to $ 1,490 per filer in Massachusetts. In 2031, the average tax increases per filer would range from $ 706 in West Virginia to $ 1,729 in Massachusetts.

Besides Massachusetts, 10 other states would see average tax increases greater than $ 1,000 per filer in 2022: Connecticut, New York, New Jersey, Wyoming, California, Florida, Washington, Colorado, Illinois and Nevada. By 2031, most states (34) would see average tax increases of $ 1,000 or more.

Each state has a large relay business sector, and the two proposals clearly aimed at business income passthrough, amounting to about $ 220 billion in new taxes over 10 years, would increase tax burdens in each state based on the amount of passed-on business income reported in each state. Average tax increases in 2022 would range from $ 32 per filer in West Virginia to $ 154 per filer in New York, rising to $ 104 in West Virginia and $ 503 in New York in 2031.

Raise the top personal income tax rate at 39.6 percent would bring in $ 116 billion over 10 years, affecting a large chunk of business income as well as other sources of investment income and wages. This provision would increase each state’s tax burden over the next three years, with average tax increases in 2022 ranging from $ 45 per filer in West Virginia to $ 360 per filer in Connecticut.

Recently, taxation of unrealized capital gains on death and increase in the capital gains tax rate would raise $ 213 billion over 10 years, impacting investors and business owners in every state and limiting the ability of many types of businesses to raise finance and remain viable for a generation to the other. The proposal would result in increased tax burdens over time in each state, resulting in average tax increases ranging from $ 42 per filer in West Virginia to $ 503 per filer in Connecticut in 2031.

The Biden administration has targeted U.S. businesses, including corporations and flow-through entities, to collect revenue to fund new spending. However, businesses are made up of people, which means American taxpayers will eventually foot the bill.

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