How will the Biden administration’s tax plans affect you?
The Biden administration’s fiscal year 2022 budget would impose a net tax increase of $1.3 trillion. This comes from $2.3 trillion in new taxes on high-income earners and businesses and $998 billion in refundable tax credits to low- and middle-income households. This represents a not-insignificant transfer of income, assuming these revenues are realized. And, as average incomes differ from place to place, it represents a not-insignificant transfer of income from place to place.
New data from the Tax Foundation allows us to see what this means for Minnesota. They have launched:
…an interactive map that allows users to see average tax changes in their state and congressional district over the period 2022 to 2031. The analysis is based on our conventional revenue estimates at the national level mapped to congressional districts using IRS data on individual tax returns for 2018…
So, we can see in Table 1 that Congressional District 3 (Dean Phillips, DFL) has the highest Projected Average Adjusted Gross Income at $128,476 and will also see the largest Average Tax Increase — $1,752. By contrast, the Congressional District with the lowest Projected Average Adjusted Gross Income ($66,306) is 7 (Michelle Fishbach, R) where there will be an Average Tax Cut of $163. Political scientists can have a field day teasing out the implications of these numbers. All these numbers relate to 2022.
Projected Average Gross Income
Average Tax Increase/Cut
Dean Phillips, DFL
Ilhan Omar, DFL
Angie Craig, DFL
Betty McCollum, DFL
Tom Emmer, R
Pete Stauber, R
Jim Hagedorn, R
Michelle Fishbach, R
Source: Tax Foundation
Overall, though, Minnesota is a loser from President Biden’s tax plans.
The Tax Foundation finds that the proposals “would raise taxes on the average taxpayer in most states throughout 2022 to 2031.” While “Several states would get a tax cut in the early part of the budget window… due primarily to the proposed temporary expansions of the child tax credit (CTC) through 2025,” Minnesota is not one of those states. On average, taxes in Minnesota will be higher in every single year of the budget window, rising from an increase of $434 in 2022 to $1,396 in 2031. And, “After 2025, every state and the District of Columbia would see a tax increase.”
The Biden administration is proposing a vast amount of new spending. If you think it is all going to be paid for by Jeff Bezos, think again. To borrow from P.J. O’Rourke, the good news is that the rich will pay for everything. The bad news is that you’re rich.