Former Vice President Joe Biden’s tax plan has three major components: imposing a “donut hole”
payroll tax on earnings over $400,000, repealing the TCJA’s income tax cuts for taxpayers with
taxable income above $400,000, and increasing the corporate income tax rate to 28 percent. This
plan would shrink the size of the economy by 1.51 percent due to higher marginal tax rates on labor
and capital.
This plan would raise about $3.8 trillion revenue over the next decade on a conventional basis, and
$3.2 trillion after accounting for the reduction in the size of the U.S. economy. The plan would lead to
lower after-tax income for all income levels, but especially for taxpayers in the top 1 percent.
