The American Families Plan was suggested today by President Joe Biden, which is designed to “grow the middle class and expand benefits of economic growth to all Americans.” There are a lot of things to like about the plan, irrespective of the aisle one stands on. But a few things stagger, which leads to the question of paying for all of it. The plan’s primary focus is to take significant steps to ensure that the taxpayers are doing their job dutifully. The major steps include increasing the IRS enforcement, reporting obligations for financial institutions, and raising taxes on the wealthy.
IRS Influence on bank accounts
The new American Families Plan requires all the banks and other financial institutions to report all sorts of outflows and inflows of the taxpayers. It is not just about the interest the taxpayers gain or the capital gains and losses. Synonymously speaking, the IRS will be of full knowledge about all of the bank accounts, whether the person earned income on that account or not, the amount in that account in a given year, and all the other transaction activities of that account. However, the working of such a system is still unclear. But the one thing that is very certain about the system is that it would erase the massive blind spot that the IRS is currently facing.
As things work in the current situation, most taxpayers do not have the allowance to report their bank details. Like the other Americans, all the self-employed taxpayers can self-report their income and deductions to the IRS. However, the W-2 Wage-earners have their number of wages reported to the IRS on their behalf. This system allowed the self-employed taxpayers to lie about gross receipts or gross revenue. It is a very frequent situation seen amongst this category of taxpayers, which is the shortcoming of the lack of information by the IRS. It is a very effective step taken down by the American Family Plan, which requires the banks to report the highest balances and aggregate deposits and withdrawals.
Here is a list of all those who would be on the losing side of the new plan:
This new plan mainly targets the wealthiest Americans. The president wants to increase the top individual income tax rate on ordinary income from 37% to 39.6%.
This proposal also holds for the households which earn more than $1 million. The new taxing long-term capital gains and dividends for them are now going to be doubled.
The president has proposed the plan and settled for the wealthy while those earning more reasonable amounts will be on the winning side.
Biden has assured all Americans earning less than $400,000 per year will not have to see higher tax bills. The taxpayers are also going to benefit from the extensions of increased tax credits included in the American Rescue Plan from March, which is funded by the tax new hikes on the wealthy.
He has also promised to care for all the low- and middle-income families with kids and working parents. Stay tuned for more information!