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The Tax Foundation is the nation’s
leading independent tax policy
research organization. Since 1937,
our research, analysis, and experts
have informed smarter tax policy
at the federal, state, and global
levels. We are a 501(c)(3) nonprofit
organization.
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Details and Analysis
of Tax Proposals in President Biden’s
American Families Plan
The Biden administration’s proposed American Families Plan (AFP) would partially
pay for about $1.8 trillion in new federal spending on education and family
programs with about $661 billion in additional taxes on higher-income individuals
and pass-through businesses like partnerships, sole proprietorships, and S
corporations.
The tax system would become more progressive than under current law through
higher marginal tax rates on high earners and expanded refundable tax credits for
lower-income taxpayers. The funding choices in the American Families Plan come at
the cost of reduced economic output, fewer jobs, and lower wages.
According to the Tax Foundation General Equilibrium Model, the American
Families Plan’s tax changes would lead to a 0.4 percent reduction in long-run Gross
Domestic Product (GDP). Gross National Product (GNP) would fall by 0.6 percent,
employment would decrease by about 64,000 full-time equivalent jobs, and wages
would drop 0.4 percent. Our analysis does not account for the economic or revenue
effects of the spending portions of the American Families Plan. It is valuable to
consider the impact of the American Families Plan tax proposals to see the trade-
offs of a particular way of financing the plan’s proposed spending.
The proposed American Families Plan would include the following major tax
changes:
Raise the top marginal income tax rate from 37 percent to 39.6 percent, which
would apply to income over $452,700 for single and