Biden Tax Plan Calculator

How the Biden Tax Plan Calculator Works

The Biden Tax Plan Calculator estimates combined federal and state income tax liability under the major revenue proposals outlined in President Biden's fiscal year 2025 budget. The tool applies a seven-bracket progressive income tax structure, a revised capital gains regime, an expanded Social Security payroll tax, and the applicable top marginal state income tax rate to produce a comprehensive annual tax estimate.

The Core Tax Formula

Total estimated annual tax liability (T) is calculated as:

T = ∑_i max(0, min(I_t, b_i+1) − b_i) × r_i + G × r_g + max(0, W − 400,000) × 0.124 + (W + G − D) × s

Variable Definitions

• T — Total estimated annual tax liability (federal income tax + payroll tax expansion + state income tax)
• I_t — Taxable ordinary income after applicable deductions
• b_i, b_i+1 — Lower and upper bounds of each federal income tax bracket
• r_i — Marginal federal income tax rate for bracket i (up to 39.6% under the Biden plan)
• G — Long-term capital gains and qualified dividends
• r_g — Effective capital gains rate: preferential rate (0%, 15%, or 20%) for households below $1M total income; full ordinary income rate plus 3.8% NIIT for households above $1M
• W — Annual wages and ordinary income before deductions
• D — Standard or itemized deductions
• s — Top marginal state income tax rate for the selected state of residence

Key Biden Tax Plan Provisions Modeled

1. Restoration of the 39.6% Top Marginal Rate

The Biden plan proposes restoring the top ordinary income tax rate to 39.6% for taxable income above $400,000 for single filers and $450,000 for married couples filing jointly. This reverses the 2017 Tax Cuts and Jobs Act reduction to 37%. According to the U.S. Treasury Department General Explanations of the Administration's Fiscal Year 2025 Revenue Proposals, this rate change targets only the top 1% of income earners and raises an estimated $300 billion over ten years.

2. Capital Gains Taxed as Ordinary Income Above $1 Million

Under current law, long-term capital gains face preferential rates of 0%, 15%, or 20%. The Biden plan eliminates this preference for households with total income exceeding $1,000,000, instead taxing such gains at the full ordinary income rate. Combined with the existing 3.8% Net Investment Income Tax (NIIT), the effective top federal rate on capital gains reaches 43.4%. Research published in the NYU Law Review on the Tax Elasticity of Capital Gains and Revenue-Maximizing Rates and the University of Chicago BFI Working Paper analyzing Biden's Economic Agenda both examine the revenue and behavioral effects of capital gains rate changes at these thresholds.

3. Social Security Payroll Tax Donut Hole

The 12.4% Social Security payroll tax currently applies only to wages up to $168,600 (the 2024 taxable wage base). The Biden plan creates a donut hole structure: wages between $168,600 and $400,000 remain exempt, while wages above $400,000 again become subject to the full 12.4% rate (split equally between employer and employee). This component is modeled as: max(0, W − 400,000) × 0.124. For a worker earning $600,000 in wages, this adds $24,800 to the total tax burden.

4. State Income Tax Component

Because state income taxes represent a major share of total tax burden, the calculator adds the top marginal state income tax rate (s) to reflect combined liability: (W + G − D) × s. A California resident faces a top state rate of 13.3%, while residents of Texas, Florida, or Nevada face 0%. New York's top rate of 10.9% and New Jersey's 10.75% rate illustrate how geography significantly affects total effective tax rates.

Worked Example

Consider a married couple filing jointly in New York with $600,000 in wages and $500,000 in long-term capital gains (total household income: $1,100,000):

• Step 1 — Federal ordinary income tax on wages: Applying the Biden bracket structure through 39.6% on income above $450,000 yields approximately $170,000 in federal income tax on wages.
• Step 2 — Capital gains tax: Total income exceeds $1,000,000, so all $500,000 in gains is taxed at 39.6% + 3.8% NIIT = 43.4%, yielding approximately $217,000.
• Step 3 — Social Security payroll tax expansion: max(0, $600,000 − $400,000) × 0.124 = $200,000 × 0.124 = $24,800.
• Step 4 — New York state income tax: $1,100,000 × 10.9% = $119,900.
• Step 5 — Total estimated liability: Approximately $531,700, representing an effective combined rate of roughly 48.3%.

For additional macroeconomic context, the Congressional Budget Office Budget and Economic Outlook: 2026 to 2036 provides long-range projections on federal revenue and the fiscal impact of major tax policy changes.

Important Disclaimer

This calculator provides estimates for educational and planning purposes only. Results do not account for all credits, alternative minimum tax, pass-through entity rules, or other individual circumstances. Biden tax proposals remain subject to Congressional action and may not be enacted in their current form. Consult a licensed tax professional for personalized advice.