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Yahoo Finance’s Rick Newman, Kristin Myers and Alexis Christoforous break down Biden’s corporate tax plan.
ALEXIS CHRISTOFOROUS: One of former President Trump's unfulfilled campaign promises was to repeal and replace the Affordable Care Act. Well, now, President Biden is looking to do the same thing, but with regards to Trump's tax proposals or a tax bill, I should say. Our senior columnist, Rick Newman, wrote about this recently for the Yahoo Finance site. And he joins us now. So Rick, do you think that Biden is going to have better luck repealing the Trump Tax Cuts and Jobs Act versus the way Trump didn't have a lot of luck with the Affordable Care Act?
RICK NEWMAN: Yeah, I think there's a good chance that Biden and his fellow Democrats in Congress, they are going to be able to make meaningful changes to tax law. And six or nine months from now, there may not be that much left of the 2017 Trump tax cuts. So we've been talking about these sort of in ones and twos. He wants to change the corporate tax rate, push it up from 21% to 28%, say. He wants to raise the individual income tax rate on wealthy Americans. I think we're going to hear more about that in three or four weeks.
But when you put all these things together, I mean, Biden, he's not using the term repeal and replace which, of course, we associate with Obamacare. But he is essentially aiming to zero out much of the 2017 tax law, which was called the Tax Cuts and Jobs Act. And I think the odds are pretty good. Even though Democrats have those extremely slim margins in both the House and the Senate, I think the odds of making these changes are pretty good.
Because the 2017 tax law didn't really accomplish that much. We now have, really, two years of data from 2018 and 2019. We didn't see a meaningful boost in GDP growth. We didn't see a meaningful boost in employment. Federal revenues went down, even though supporters of that bill said they would go up. So there's not a lot to really defend with that law, which I think gives Democrats better chances of getting some of their own favored tax laws on the books.
KRISTIN MYERS: All right, so Rick, that Tax Cuts and Jobs Act, you and I have chatted about this a lot. And we all know it went mainly to the wealthy and to a lot of the corporations. However, more than 65% of Americans did receive some form of a tax cut. They did receive more money at the end of the day. So how, then, will this new plan really work to ensure that middle Americans, lower Americans aren't going to receive some sort of tax hike after it's said and done?
RICK NEWMAN: Yep, well, we know Biden's mantra that under his plans, nobody who-- no households with more than $400,000 in household income will see a tax hike. And Biden has already put tax breaks for middle income and lower income Americans on the books with the one-year child tax credit, which is a meaningful boost in take-home pay for parents with kids. That was a one-year plan in the stimulus plan that Congress just passed.
But Biden, in future legislation, he wants to make that permanent. So Biden is basically saying-- you know, this is what he said he wanted on the campaign trail. He wants to give working class and middle class Americans more of a tax break and raise the burden on higher income Americans so they do their, quote, "fair share." We're going to hear that phrase a lot.
And polls show that Americans generally support this. The Trump tax cuts never got above a 50% approval rating. Most people do think they favored businesses and the wealthy too much. And as the economic data comes in, it is basically demonstrating that was the fact.
ALEXIS CHRISTOFOROUS: You know, before we let you go, Rick, what about these proposals from Biden regarding corporate taxes? It seems as though now those proposals don't have as much as many teeth as they once did, right? I mean, it looks like he's going to go soft on some of the top earning companies, those that usually skirt paying taxes altogether. Can you tell us a little bit about that proposal?
RICK NEWMAN: Yeah, that's what some people call the alternative minimum tax on corporations. This is somewhat controversial because those big companies we hear about that pay little or nothing in federal tax, federal income tax, you know, they're used-- they're mostly using legal tax breaks that are there because they're supposed to create incentives for investing in the US economy, things like the research and development tax credit, other tax credits for purchasing equipment and things like that.
So what these companies do is they just claim all those tax breaks. And that gets their tax bill below 10% or below even 5% sometimes. So the Biden plan is for the biggest companies. And he has changed his threshold on this. So for the biggest companies, which would be those with more than $2 billion in net income-- and there are only about 200 companies that meet that threshold-- they would now be subject to this 15% minimum tax.
So if you use these tax breaks to get your tax bill below 50% of your profits, you would end up just having to pay 15% of your profits. Again, Congress would have to put this into law. The threshold Biden was talking about when he was a candidate was much lower. It was $100 million in profits. So I guess they looked at reality and said that would probably punish companies that we don't really want to punish. We're just going to aim at the big guys here. And that's the idea at this point.
ALEXIS CHRISTOFOROUS: All right, we'll leave it there. Rick Newman, thanks so much. And as always, you can read Rick's article on yahoofinance.com.