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(By comparison, the 37% top individual rate applies to income exceeding: $523,600 for single filers and heads of household, $628,300 for married joint filers, and $314,150 for married separate filers.)
The 39.6% top rate would kick in during the 2022 tax year, according to the proposal. (That means it would apply to tax returns filed in 2023.) Congress would still need to pass legislation enacting the policy, which isn’t assured.
Biden’s proposal is one of several measures aimed at raising taxes on households earning more than $400,000 a year.
The tax revenue would help finance initiatives in the American Families Plan to expand the social safety net, including funding for four additional years of free schooling, heavily subsidized child care for middle-class families, federal paid family leave and expanded child tax credits.
Hiking the top rate to 39.6% would raise an estimated $132 billion over five years, according to the Treasury Department.
The top rate is slated to increase even if Congress doesn’t pass Biden’s proposal. The Tax Cuts and Jobs Act’s individual tax reductions will lapse after 2025 due to how Congress structured the law.
Biden’s proposed income thresholds for the 39.6% rate correspond to the pre-TCJA thresholds, indexed for inflation, according to a Treasury official.