President Biden Unveils The American Families Plan
As President Biden’s first 100 days come to an end this week, his administration has rolled out its third proposal to stimulate the American economy: The American Families Plan. The first economic stimulus was the American Rescue Plan Act, which provided $1,400 direct payments to individuals as well as billions of dollars in state and local aid and funds to other struggling economic sectors.
The second is the Made in America Tax Plan, a $2.3 trillion plan aimed at transportation, manufacturing, job creation, housing, and other infrastructure proposed to be offset through a series of corporate tax reforms. The American Families Plan increases the childcare tax credit, builds on the Affordable Care Act, and targets those currently in the 37% tax bracket to pay more tax.
Here’s a high-level breakdown of what the plan includes:
Tax Cuts for America’s Families and Workers
- Permanently extend the Affordable Care Act premiums tax credit in the American Rescue Plan
- Expand the Child Tax Credit from $2,000 per child to $3,000 per child for six-year-olds and above, and $3,600 per child for children under six through 2025.
- Make permanent the full refundability of the Child Tax Credit.
- Permanently increase tax credits to support families with child-care needs. For children under the age of 13, families making less than $125,000 per year will receive a tax credit for as much as half of their spending on qualified childcare up to $4,000 for one child or up to $8,000 for two or more children.
- Permanently extend the expansion of the earned income tax credit for childless workers.
Increase Taxes on the Highest Incomes
- Increase the top tax bracket of 37% (set by the 2017 Tax Cuts and Jobs Act) to 39.6%
- Tax income from long-term capital gains and certain dividends at ordinary tax rates for households making over $1 million.
- Repeal the step-up in basis of inherited assets at death for gains greater than $1 million ($2.5 million per couple when combined with current law exemptions for real estate). The fact sheet notes special rules would be provided to protect family-owned businesses and farms.
Stricter Reporting and Enforcement
- Increase investment in the IRS, ensuring that additional resources go toward enforcement against those with the highest incomes.
Barnes Dennig will continue to monitor the president’s proposals. For a complete breakdown of The American Families Plan, visit the White House’s website. If you have any questions about the provisions in this plan or would like to talk with a tax professional about how it might affect you, please reach out to a member of our team. We’re here to help.