Joe Biden's plan CUTS taxes on the middle class, and the media owes him an apology for pretending otherwise.

Photo credit: Joe Biden for President, Flickr. License.

In a clip popularized on social media by the Republican National Committee, Jonathan Karl on ABC's This Week on Sunday grilled Biden campaign co-chair Rep. Cedric Richmond about Joe Biden's tax plan. Karl points to an analysis of Biden's tax plan by the Tax Policy Center and claims that it shows that in addition to significantly increasing the federal tax burden of those making over $400,000 a year, Biden's plan will also slightly raise taxes on middle income earners by $260 on average.

But that's not actually what the TPC analysis shows.

While the Tax Policy Center's analysis does find slight, negligible decreases in after-tax income for the bottom income levels, that finding is not due to Biden's proposed tax legislation itself but due to an outdated trickle-down economics assumption that of raising taxes on rich people will have a deleterious effect on poor people's wages. The analysis is explicit about this distinction, while adding that Biden's tax plan also contains tax credits for low and middle-income Americans.:

Nearly all of the increase in tax burden for the bottom four income quintiles would be because of the indirect effects of increased corporate income taxes. Our model assumes that in the long run 60 percent of the corporate income tax is borne by shareholders, 20 percent is borne by capital owners, and 20 percent is borne by labor. The Joint Committee on Taxation, Congressional Budget Office, and Treasury make similar assumptions. For low-and middle-income households, the reduction in wages and investment income would, on average, more than offset the effects of Biden’s new tax credits.

While it is not entirely impossible for targeted versions of corporate tax relief to raise wages, for this assumption by TPC - that repealing the Trump corporate tax cuts would significantly reduce wages - to work, it would have to be first demonstrated that those tax cuts significantly raised wages in the first place. But just last year, The Brookings Institution, which is one of the parent organizations of the Tax Policy Center, contradicted this very basis.

In an editorial otherwise praising corporate tax cuts, Harry J. Holzer, a Senior Fellow at The Brookings Institution wrote on May 8, 2019: (emphasis mine)

When congressional Republicans and the Trump administration pushed for their tax cuts in 2017, they promised American workers that slashing the corporate tax rate would raise their wages.

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But, to date, those predictions have mostly failed to come true. Corporate stock buybacks have swamped other uses of the tax savings. Wage growth has edged up very modestly since the tax cuts passed, more likely due to tight labor markets than the tax cut. When helping workers, many companies have chosen one-time bonuses instead of permanent increases in base pay.

If the Trump corporate tax cuts did not increase wages and led instead to stock buybacks - as we know to be the case - it is safe to discard the assumption embedded in the TPC analysis that its reversal would dampen wages.

But even if one discounts the major tax breaks middle class families are likely to see from the expanded tax credits for health insurance that Biden is promising under his plan to expand the Affordable Care Act, it is simply a falsehood that Biden's income tax plan, even in and of itself, would in any way harm the middle class.

The Tax Policy Center analysis also does not account for the spur in job creation from Biden's plan to invest in rebuilding the American economy - which Moody's says will add 19 million jobs (that's 7 million more than the Trump plan) and raise average household incomes by nearly $5,000 (zero under Trump's plan). Nor does it account for the major tax breaks middle class families are likely to see from the expanded tax credits for health insurance that Biden is promising under his plan to expand the Affordable Care Act.

But even if one ignores Biden's plan to invest in the economy and health care, it is simply a falsehood that Biden's income tax plan, even in and of itself, would in any way harm the middle class.

And people who call themselves journalists should at least be able to find these basic facts.