Matt Gardner, Senior Fellow at The Institute on Taxation and Economic Policy joins Yahoo Finance’s Kristin Myers for a break down of Joe Biden’s tax proposals.
- It was mentioned last night during the vice-presidential debate. And I want to bring on now Matt Gardner. He's a senior fellow at the Institute on Taxation and Economic Policy. We've seen-- ITEP for short. We have ITEP's new 50-state analysis of the Biden revenue-raising tax proposals. So Matt, good to have you join us.
As I just mentioned, taxes being brought up in the debate last night. And we saw Kamala Harris-- Senator Harris-- have to repeatedly try to defend Biden's tax proposals, that it wasn't going to be raising taxes on most Americans. And I know that you guys did an analysis of former vice-president's proposal. Hoping you can give us just a really effective fact-check here, so to speak. Is it going to be raising taxes, and if so, on who?
MATT GARDNER: Well, there's no question that Biden has proposed to increase some taxes on some people. To an extent I've not seen in a lot of candidates ever, he has been super clear about focusing on those tax increases on people earning over $400,000 a year, which, as our new report shows, is a pretty small share of the population.
There was a lot of confusion from-- a little bit from both sides in last night's debate-- about whether that was really true. But I think that just stems from a complete mis-- an incomplete understanding of the plan. Biden himself has said as clearly as he possibly could that he's gonna put a line in the sand at 400,000. If you're on less than that, you will not pay more in direct taxes, personal income taxes, and payroll taxes that fall on individuals.
KRISTIN MYERS: So Matt, that 400,000 number, is that an arbitrary number or is that a very specific number because the amount of folks that it's going to impact, at least, that earn more than that?
MATT GARDNER: Um, I don't know where that number came from. Pretty clearly, the effect of it, our new report shows that nationwide, if you draw a line at 400,000, below which you don't want to increase taxes, as Biden has said, then at most you're looking at a tax increase on 1.9% of Americans.
It's a vanishingly small share. And I think that's certainly the reason why candidate Biden chose a number that large. There's nothing magic about 400 per se other than the fact that it pretty clearly excludes anyone who could possibly be thought of as middle income.
KRISTIN MYERS: Now, I want to just read a part of your report just for everyone at home. Your analysis found that 97% of this increase would actually fall to the top 1% of earners in the country. So again, as you mentioned, you don't necessarily know where that 400,000 number comes from. But it does seem to be impacting the, you know, the top earners inside the country. Of course, however, $400,000 means one thing in New York-- and specifically New York City-- and perhaps something entirely different in a state like West Virginia. So wondering what the state just, you know, briefly and broadly, if you can kind of highlight what that impact would be on a state basis.
MATT GARDNER: Sure. There are a few states where the percentage affected is way below that 1.9% on average. West Virginia, for example, it's about half of 1%. At the other end of the spectrum, you have states that have lots of high-income individuals, like New York and Connecticut, Washington, DC. I think the highest we found nationally was Connecticut where it's 3.7%.
But, you know, I'd emphasize that that's an outlier, and that even there what we're measuring is just whether you are affected even by a dime under this thing. Someone at 401,000 would have a pretty small impact. So there's some variation, but the uniform result is that 95% or more of Americans in every single state would be utterly unaffected by the tax increases Biden has outlined.
KRISTIN MYERS: Matt, just looking through this report here, it seems as if the states that actually would be least impacted on a direct basis of this tax increase-- you mentioned, we both mentioned West Virginia, also including Mississippi, Arkansas, New Mexico, and Kentucky-- so, broadly speaking, Republican states, whereas on the flip side, it's actually Democratic states that seem to be impacted the most, or at least residents of Democratic states-- Connecticut, New Jersey, Massachusetts, California, New York, and also, of course, DC would be most impacted by this increase.
Wondering, however, if you think that Republicans, upon hearing this, might get behind this plan.
MATT GARDNER: Well, I mean the same could be said of the Trump tax cuts of 2017, because they reserve their benefits so much for the best-off Americans, there was inexorably a bigger tax cut for a lot of these blue states that have a lot of high-income individuals. So it's not-- it certainly isn't anything novel about this. And the reason you're seeing this result is primarily because of the Trump tax cuts.
Essentially what candidate Biden is proposing to do is to undo some-- very far from all-- but some of the tax cuts for the best-off that Donald Trump enacted just three years ago. So this tax plan appears to be hitting blue states more-- and rich people in blue states more-- primarily because it was high-income folks in the blue states who benefited the most from the last round of tax cuts.
KRISTIN MYERS: All right. Well, we will have to leave that there. Thank you so much for breaking that tax proposal down and also for providing a little bit of that fact-check, much needed in today's times. Matt Gardner, senior fellow at the Institute on Taxation and Economic Policy, also known as ITEP. Thanks so much for joining us today.
MATT GARDNER: Thanks for having me.