In March of 2021, President Biden signed the American Rescue Plan into law. This plan was designed to continue to offer relief to American families and communities amid the COVID-19 pandemic.
In an effort to do more, President Biden rolled out The American Jobs Plan and the American Families Plan to a joint session of Congress in late April. The administration says the plan intends to grow the middle class, expand economic growth to all Americans and leave the United States competitive.
This was President Biden’s first speech in front to Congress and in it he highlighted how these policy plans will likely touch individual taxpayers.
The plan will cost approximately $1.8 billion. The biggest highlights from the plan include offering two years of universal, high quality preschool to three-and-four-year-old children across the country, as well as offering two years of community college at no charge to low- and middle-class income students. Investments will also be made in improving teacher training and school support.
The plan also ramps up the availability of high-quality childcare. The plan calls for low-and middle-class income families to spend no more than seven percent of their income on childcare. It will also provide direct support to workers and families by creating a national comprehensive paid family and medical leave program that will offer 12 weeks of paid family and medical leave.
Extending the increased Child Tax Credit from the American Families Plan is also in the plan. In the American Rescue Plan, the tax credit would stay as is until at least the end of 2025 and other tax credits from the Affordable Care Act will move to permanent status.
The payment for the elements in this new plan will come from tax reform. The specific provisions are as follows:
- The top tax rate will increase for the wealthiest group of Americans, those making 400k or more a year. That rate will jump to 39.6%.
- Also touching those making 400,000k and above, the 3.8% Medicare tax will be applied to them consistently.
- The Capital Gains tax rate will take a climb for those making more than $1 million a year. And as for “step-up” basis, which would allow taxpayers to escape their tax burden on their wealth by passing certain properties down to family members- that will be eliminated in the new plan.
- Financial Institutions will be made to report information on account flows. This transparency will open up activity from investments and other matters to additional reporting requirements.
Now, we wait for the Biden Administration to release their FY2022 budget. From there, budget reconciliation will have to be considered in order for this plan to take full shape. Once the amount of a reconciliation is decided upon, the true nature of how much it might off-set tax increases can be explored.
We will continue to monitor this situation and keep you posted on future developments. If you have any questions or concerns, please reach out to your contact at H&M