The budget proposed by Biden aims to reduce taxes for numerous individuals and reinstate deductions for families. Here is what you should be aware of.
Margaret Brennan unpacks Biden’s State of the Union
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President Joe Biden’s proposed 2025 budget
The benefits for numerous families and individuals with low income, as well as elderly citizens, include the reintroduction of a program that helped alleviate poverty for millions of children during the pandemic.
The recently announced budget on Tuesday plans to cover the cost of tax cuts by increasing taxes for corporations and wealthy individuals. For example, one suggestion would fully undo a reduction from the 2017 Tax Cuts and Jobs Act introduced by former President Donald Trump.
The majority alleviated the tax responsibilities.
Concerning corporations and the individuals with the highest incomes in the country.
The proposals to provide new tax breaks for low- and middle-income Americans come as many people continue to struggle with the higher cost of living. About 1 in 3 households say they don’t feel financially secure, according to a new study from Northwestern Mutual, which said that represents the highest share since it began its annual study in 2009.
The cost per child is $300 for every month.
That expanded tax benefit, which proved to be immensely popular with families, also helped lift millions of kids out of poverty. Once it expired in 2022, the poverty rate for children soared.
The Biden administration’s proposed budget would reinstate the expanded Child Tax Credit (CTC). Like during the pandemic, this enhanced credit would once again give $3,000 per child aged six or older and $3,600 for each child under six, as opposed to the current limit of $2,000.
Families who are eligible for the CTC will once again receive monthly payments from the IRS. According to the Treasury Department’s statement on Monday, this method of distributing funds is a more pragmatic approach to providing relief to families when they need it, instead of a single large payment at the end of the year.
At the moment, families receive the CTC once a year, when they file their yearly tax return. This can be seen either as a refund on their taxes or as a decrease in their tax responsibilities.
What options do low- and middle-income employees have for receiving a tax reduction?
Biden’s plan includes increasing the scope of the Earned Income Tax Credit (EITC), which is a tax credit intended for individuals earning less than $64,000 per year. This proposal would make the credit available to a larger group of people, including those without children and elderly individuals.
The current version of the EITC primarily benefits families with low or moderate incomes and children. While individuals without children can still be eligible for the EITC, they are limited to receiving a maximum credit of $600. In contrast, families with three children can receive up to $7,430 under the current guidelines set by the IRS.
The proposed Biden plan aims to increase the coverage of the EITC to encompass a greater number of low-income employees who do not have children, as well as senior citizens. According to the White House, this expansion would result in a reduction of taxes by an average of $800 for 19 million working individuals and couples. The group benefiting from this would consist of 2 million workers above the age of 65 and 5 million adults between the ages of 18 and 25.
What other opportunities for rest would families and employees receive?
The recent budget plans from Biden also include several other suggestions.
- Create a new program for families earning less than $200,000 that would guarantee affordable child care from birth until kindergarten. The White House said most families would pay $10 or less a day and that the program would help parents of more than 16 million kids.
- Create voluntary, free preschool for all 4-year-old kids.
- Provide $10,000 tax credits
Providing financial assistance to individuals purchasing a home for the first time or owning a “starter home” in order to alleviate the burden of home-buying or selling expenses.
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Extend the premium tax credits indefinitely for individuals purchasing health insurance from the Affordable Care Act’s marketplaces. Additionally, the budget would offer Medicaid-like coverage to residents in states that have not implemented the Medicaid expansion.
What is the funding source for Biden’s proposals?
The White House clarified that the suggestions will be funded through increased taxes for wealthy individuals and corporations. They emphasized that individuals earning under $400,000 will not experience any tax hikes, as the president has reiterated in the past.
These proposals include:
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“Proposing an increase in the corporate tax rate to 28%, in contrast to the current rate of 21% under the 2017 Tax Cuts and Jobs Act. Before the TCJA, the corporate tax rate stood at 35%.”
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The government is proposing that individuals with a net worth exceeding $100 million should be required to pay a minimum of 25% of their income in taxes. Many wealthy individuals are able to pay lower tax rates due to their reliance on sources such as capital gains, which are taxed at lower rates than wages.
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Raising the maximum income tax rate for individuals to 39.6%. This would essentially eliminate the tax decrease that the wealthiest individuals in the country experienced due to the TCJA, which lowered the highest tax rate from 39.6% to 37%. The Biden administration stated that this change would affect single taxpayers making over $400,000 and married couples making over $450,000 annually.
Aimee Picchi
Source: cbsnews.com