Yahoo Finance I’m an Economist: How a Biden Reelection Would Impact Middle Class Taxes
With the presidential election coming this November and Joe Biden up for reelection, there’s been a lot of buzz about what kinds of changes might come about in 2025 and beyond. Whichever candidate wins the White House will have to deal with a rapidly changing U.S. economy, and that includes potential changes to the tax system.
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If Biden gets reelected, it could mean the continuation or expansion of certain tax policies that are already in effect, as well as certain tax incentives for things like health insurance and homeownership. This could be good news for middle-class Americans, as well as those who earn less each year.
For right now, all economists can do is speculate. However, Isabella Brown, an economist, politician and campaign manager at Qualify Candidates, had a few predictions as to what might happen if Biden secures a second term in office.
Tax Laws Could Become Fairer
With each new U.S. president — as well as those up for a second term — comes changes to the existing policies and tax regulations. Under the Biden-Harris Administration, Biden has also made certain tax-related changes and new proposals that could positively affect the middle-class.
“President Biden’s tax approach is meant to make taxation fairer, a trend that might continue should he be reelected,” said Brown. “For instance, since he assumed office, President Biden has implemented several tax reforms that aim at ensuring that richer Americans and corporations pay their dues and provide some relief to the middle class.”
Only time will tell whether or not this prediction becomes a reality, but Brown’s predictions show optimism — particularly for middle-class and lower-class households.
“The policies of the current U.S. president pay more attention to tax[ing] the rich and offer credits and deductions to the middle class so that they build an economic environment that is quite equitable,” she said.
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There Could Be a Continuation of Existing Tax Credits
As part of Biden’s proposed tax bill comes the continuation of certain tax credits meant to support the middle class financially. A second term under the current Administration could mean a greater emphasis on such credits as the expanded child tax credit and ACA premium tax credits, according to Brown.
“About middle-income families, who have been paying higher taxes than the other classes, Biden has shown his interest in expanding further the child and dependent care tax credits as a way of eventually reducing their taxable incomes,” she said.
With the expanded child tax credit, eligible middle-class families could receive more benefits, which could result in a significantly lower tax burden. Tax credits could be as much as $3,600 per child. Those who earn $200,000 or less (or $400,000 if filing jointly) could qualify for this tax credit.
The ACA premium tax credits, meanwhile, exist to make healthcare more affordable — and free up disposable income. There may be income limits for this, but middle-class families are likely to qualify. On average, these tax credits could save low- and middle-class families $800 on marketplace health insurance plans.
There Could Be Changes to Taxable Income
According to Brown, if Biden gets re-elected, it could mean an increased standard deduction. “Higher deductions mean instant tax breaks for many middle-income households,” she said. Federal income tax brackets could also be lowered.
That said, Biden has also vowed to let certain Trump-era tax cuts expire in 2025, including the Tax Cuts and Jobs Act of 2017. If the TCJA expires, Americans everywhere could face a higher tax liability.
Biden has gone on the record saying that anyone earning less than $400,000 would not be affected by this change, however. That includes middle-class Americans.
If anything, the expiration of the TCJA would primarily impact the ultra-wealthy and major corporations as Biden has indicated a desire to tax them more heavily while helping the working class — middle-class households included — get ahead financially.
These changes could, in theory, be a good thing, especially as pertains to economic stability.
“Lowering taxes and increasing disposable income for working-class households incentivizes consumerism, which in turn enhances economic development,” said Brown.
Homebuyers Could Face Greater Incentives, Too
The average home sales price in April 2024 was just over $505,000, according to the U.S. Census Bureau. Even for middle-class households, many of whom earn around $100,000 or more annually, the dream of homeownership has become increasingly more distant.
Part of Biden’s proposed tax bill is to make homeownership less of a dream and more of a reality.
“[Biden’s] propositions involve tax credits for first-time homebuyers, and increased write-offs for property taxes which will be directed at reducing housing costs among middle-income earners in America,” said Brown.
For example, Biden has proposed a $10,000 tax cut for eligible first-time buyers and those who currently have a starter home — any property priced below the median for their county — and want to trade up. For the latter to qualify, they’ll need to sell their current home to another owner-occupant.
Considering how expensive real estate is right now, and how high mortgage rates are, Biden’s affordable housing initiatives might or might not make homeownership more affordable.
Retirement Accounts Could See Additional Tax Breaks
If Biden’s re-elected, individuals with tax-advantaged accounts — namely, retirement accounts — could also benefit from greater incentives and crack downs on “junk fees” that impact the long-term security of their investments.
“Additional tax breaks on retirement account contributions [as] proposed by Biden’s policies [are] geared towards helping middle-class households save more efficiently for tomorrow,” said Brown. According to her, this — along with the current Administration’s other proposed tax incentives — could theoretically help middle-class families create generational wealth.
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