President Biden’s promise not to raise taxes on those earning less than $400,000 faces challenges as more Americans reach this income threshold. Adjusted for inflation, $400,000 today equates to about $486,000 in 2020 dollars, diminishing its significance. Despite the increased number of high earners, Biden’s administration remains committed to ensuring tax increases target only the wealthy, emphasizing the fairness of the tax system and the fight against tax evasion among the richest Americans.
During the 2020 presidential crusade, candidate Joe Biden offered voters a bold promise: He wouldn’t increase taxes on anyone acquiring money less than $400,000.
President Biden has maintained the same commitment, and the exact round sum, into his reelection movement in 2024. If your revenue falls short of $400,000, you’re resistant to tax hikes. If you make more than that, your taxes may move up, and you just might be audited by the IRS.
But a lot more individuals earn $400,000 now than in 2024.
Between 2019 and 2024, the number of American households gaining more than $400,000 is projected by nearly half, from 2.6 million to an assessed 3.8 million out of approximately 131 million households. The busts come from census data collected by the Economic Innovation Group, a general policy think tank based in Washington, D.C.
$400,000 doesn’t have the same buying power in 2024
And $400,000 doesn’t have the exact buying power. If you change the figure for inflation, a $400,000 pay in January 2020 would be worth about $486,000 now.
Back then, $400,000 was a better significant number, said Jonathan Swanburg, a certified monetary planner in Houston.
Perhaps it is too much to request a candidate to use a cost-of-living adjustment to a pithy movement pledge. If Biden hit the track in 2024 pledging not to increase taxes on anyone making less than $486,000, voters might react with confusion.
And therein, some economists state, lies one of several issues with invoking an incidental figure when setting fiscal approach.
Biden administration officers say the $400,000 pledge was suggested to signal his promise not to increase taxes on anyone but the wealthy, and his search to ensure that the very wealthy don’t fudge on their taxes.
President Biden’s pledge not to increase taxes on anyone earning less than $400,000 is a clear, straightforward and easy-to-understand commitment to American individuals that, as long as he is president, he will not increase taxes on the middle course by one penny, said Jeremy M. Edwards, a White House spokesperson, counting that the president will rather fight for a tax strategy that ultimately asks the richest Americans and biggest corporations to spend their fair share
Even now, over 95% of Americans earn less than $400,000
Biden officers note that, even now, well over 95% of American families make less than $400,000.
The $400,000 pledge models well with advocates for advanced taxation, the principle of increasing the tax rate for more increased earners.
If you’re earning $400,000, you’re richer than 97% of Americans, and your median net worth is $6.4 million, said David Kass, administrative director of the nonprofit Americans for Tax Fairness. These are residents who are accomplishing well.
Who earns $400,000 a year, anyway?
A growing digit of lucrative jobs now pay $200,000 or even $300,000 a year, on middle, based on national data for 2023. Rare positions pay $400,000.
Among the top earners:
- Pediatric surgeons ($449,320 in average annual salary)
- Cardiologists ($423,250)
- Radiologists ($353,960)
- Chief executives ($258,900)
- Psychiatrists ($256,930)
- Airline pilots ($250,050)
And what concerning audits? Biden has promised to extend billions of dollars in new income by going after rich tax cheats, again pledging not to target anyone gaining less than $400,000.
But does that cutoff for audits involve only individual earners with $400,000 payments or complete households? On that point, Biden’s commitment was a little vague, said one senior IRS officer, who spoke in a situation of anonymity because he was not authorised to be quoted for attribution.
The most current audit data, for the tax year 2021, show a comprehensive audit rate of 0.2%, or around one audit for every 500 rescues from individual taxpayers.
For returns that directed income between $500,000 and $1 million, the audit rate increased to 0.3%: one audit for every 333 rescues.