Joe Biden wants to raise taxes on America’s top earners. Would that include himself?
Yes it would, according to Yahoo Finance calculations. As president earning a $400,000 salary, the total tax bill for Joe Biden and his wife Jill would be about $35,000 higher under the Biden tax hike proposals than if nothing changed. If the Bidens earned the same amount as in 2019—their last tax return available—their taxes would be about $15,000 higher under the Biden tax hikes. And if the Bidens ever earn as much as they did in 2017—their most prosperous year—their tax bill under the Biden tax hikes would rise by about $250,000.
Biden wants to raise a variety of taxes to pay for new infrastructure, a green-energy transformation, generous new family benefits and more aid for education. He’d raise the corporate tax rate from 21% to 28% and the top individual income tax rate from 37% to 39.6%. The capital-gains rate on people earning more than $1 million per year would nearly double, and a raft of smaller tax hikes would fill out the plan.
The Bidens earned $944,737 in taxable income in 2019, putting them solidly in the top 1% of earners. Most of their income—about $538,000—came from book royalties and related income streams. Joe Biden earned $135,116 from his teaching position at the University of Pennsylvania and $186,001 in federal pensions. Jill Biden earned $73,286 from her community college teaching job. Social Security benefits, interest and a small IRA distribution accounted for the rest.
Two tax changes Biden has proposed would likely push the Bidens’ personal tax bill higher. The first is straightforward. As high earners, the Bidens’ top income tax rate would jump from 37% to 39.6%. For married couples filing jointly, the 39.6% rate kicks in above $640,500 in income, which would leave $304,237 of the Bidens' 2019 income taxed at the highest rate. Compared with the lower 37% rate, that alone would raise their taxes by about $7,900.
As a candidate, Biden also said he’d shore up Social Security by applying the SS payroll tax on higher incomes. Under current law, there’s a cap on the amount of income subject to the 12.4% Social Security tax, which is $142,800 per individual in 2021 (the income cap generally rises every year). Biden said he’d apply the tax to incomes above $400,000, while exempting income between the annual cap and the $400,000 threshold. As president, Biden hasn’t included that provision among his various tax hikes, but other Democrats back the idea and it could end up in legislation Congress votes on later this year.
If that tax changed, it would hit the Bidens' tax bill as well. The Bidens earned $517,334 in normal wage income in 2019, and they paid the full amount of Social Security taxes up to the income cap. That would still leave $117,334 in wage income above $400,000. At the employee share of the tax—which is 6.2%, with the other half paid by the employer—that would raise their tax obligation by another $7,275.
The Bidens haven't claimed any capital gains in recent years, and they earned less than $1 million in 2019 anyway, so they wouldn’t have to deal with that tax hike. The higher income tax rate and the new Social Security tax on high incomes would raise their taxes by a combined $15,000 or so. "He'd raise his own taxes by a little bit," says financial adviser Matthew Costigan of HBKS Wealth Advisers in Pittsburgh, who has analyzed the Bidens' tax returns."What's unclear to me is whether we're going to change the standard deduction or repeal the limit on state and local deductions. That could change his taxes, too."
This analysis is oversimplified and there are caveats. The Bidens funnel the majority of their earnings through two pass-through corporations that require them to pay the employer version of the Social Security tax, as well as the employee version, on some of those earnings. For simplicity, we did not include the employer portion of the tax in either the before or the after part of our comparison. Changes that push any taxpayer’s obligation higher could also trigger different tax strategies able to offset tax hikes. And the Bidens’ future income streams are unlikely to ever be identical to any prior year.
Yet the analysis does show Biden would likely pay more, along with other well-off taxpayers he is imploring to pay their “fair share.” Biden’s predecessor, President Donald Trump, probably did the opposite when he signed sweeping tax cuts into law in 2017. Trump never released any tax returns, so it’s impossible to know for sure, but the 2017 law contained several provisions, such as a lower rate on pass-through corporations and a curtailment of the alternative minimum tax, that may have saved Trump millions of dollars—if he pays federal taxes at all.
Yahoo Finance estimated the change in Biden’s tax bill under two other scenarios. First, as president, Biden earns a $400,000 salary, even as most of his prior income streams, such as royalty and pension income, continue. If Biden replaced his 2019 income from Penn ($135,116) with his new salary as president, and everything else stayed the same, his taxable income would be around $1.2 million and his tax bill under the current rules would be about $395,000. With the Biden tax hikes, that would rise to around $430,000—an increase of about $35,000, or 8.8%. The same caveats apply regarding the pass-through businesses and other variables.
It’s also possible at some point in the future Biden might have another killer year like he did in 2017, when his gross income exceeded $11 million and his taxable income was $9,578,639. He could retire from government again, write another bestseller and give more paid speeches. So why not estimate his 2017 tax payments under the Biden tax hikes? Bumping into the higher 39.6% bracket would raise Biden’s 2017 tax bill by around $232,000, and he’d pay another $20,000 or so in additional Social Security taxes. Total hit: About $252,000. The Bidens paid a hefty $3,744,640 in federal taxes in 2017, and the higher rates would raise their burden by roughly 6.7%. They might be quite happy to pay that much income tax in the future.
Rick Newman is the author of four books, including "Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. You can also send confidential tips, and click here to get Rick’s stories by email.