AP FACT CHECK: GOP claim of broken Biden pledge not so clear

House Republican leader Kevin McCarthy is being misleading by asserting that Democrats' $3.5 trillion social spending bill would break President Joe Biden’s campaign promise not to tax Americans who earn less than $400,000 a year

Biden Congressional Bsaseball (Copyright 2021 The Associated Press. All rights reserved.)

Blasting a $3.5 trillion social spending bill that Democrats hope to salvage, House Republican leader Kevin McCarthy asserted the legislation would break President Joe Biden’s campaign promise not to tax Americans who earn less than $400,000 a year. That’s technically accurate yet also misleading.

McCarthy also falsely suggested Thursday that a Biden administration proposal to help pay for the legislation by boosting IRS tax enforcement would amount to spying targeted at everyday Americans.

A look at the claims and reality:

MCCARTHY: “Joe Biden said: ‘No one making under $400,000 will see their federal taxes go up.’ That’s a lie: In fact, under his plan, an average family who earns over $50,000 will see a tax increase.” — news conference Thursday.

BIDEN: "I give you my word as a Biden: If you make under $400,000 a year, I’ll never raise your taxes one cent. But, I’m going to make those at the top start to pay their share in taxes." — tweet Sunday.

RONNA MCDANIEL, head of the Republican National Committee, replying to Biden's tweet: “Not true — according to the Joint Committee on Taxation, Biden’s plan will hike taxes on families making $50K or more a year.” — tweet Monday.

THE FACTS: Biden’s pledge defies simple analysis. Republicans can legitimately ding the president for violating his campaign pledge to not raise taxes on anyone making less than $400,000. But Republican leaders also rely on an economic model in which any tax that clearly targets companies and wealthy stockholders can be interpreted as a middle-class tax hike.

So let’s skip the politics and focus on what is really going on here.

Congress’ Joint Committee on Taxation and other analysts use the idea of “tax incidence” when estimating how much people pay. This is an economic model about who bears the expense of tax changes. When companies face higher taxes, much of the cost is borne by shareholders. But some of the cost comes at the expense of workers in the form of lower salaries, and that’s a major reason why the Democrats’ policies can be portrayed as a middle-class tax hike.

Nearly 17% of taxpayers will pay more in 2023, including people earning less than Biden’s target, according to the Joint Committee's analysis. This is a function of how economic models work, which seldom conform perfectly to the messaging of political candidates. Biden’s tax policies are clearly designed to get most of their revenue from companies and the wealthy.

But is McCarthy right that an average family earning $50,000 will see a tax increase? Not quite.

The Tax Policy Center has released an extensive analysis by income quintile. It found that the middle 40% to 60% of earners will get on average a cut of $630. This is true even though 70% of the tax units in this group would get a slight tax increase averaging about $230. How is that possible?

Well, the increases largely reflect how corporate tax hikes could reduce wages. But Biden’s plan also includes an expanded child tax credit that would help households with dependents under the age of 18. The tax credit ranges from $3,000 to $3,600 per child. This credit only goes to people with children. The credits are so large that the entire package nets out as a tax cut for people who think of themselves as middle class.

The Tax Policy Center analysis also makes clear that the increases are targeted at the wealthy. The top 0.1% of earners would owe an additional $1.1 million next year, enough to raise a total of $132.2 billion.

___

MCCARTHY: “Now Democrats want to spy on anything you earn or buy that is more than $600. By hiring 85,000 new IRS agents to dig through every aspect of your life the Democrats want to enlist a bureaucratic army to achieve their goal of a big-government socialist nation.”

THE FACTS: That's an exaggeration. There is no spying nor monitoring of individual transactions as McCarthy describes it.

As part of its efforts to crack down on tax evasion by the wealthy, the Biden administration has proposed to have banks report total money flows into and out of bank accounts each year that are greater than $600, or for accounts with at least $600 in them. But the banks would not report individual transactions. The Treasury Department estimates that $600 billion a year is lost to tax evasion, equal to all the income taxes paid by the bottom 90% of taxpayers.

The Treasury Department has explained that while most Americans have their pay reported to the IRS on W-2 forms, many high-income Americans receive income from legal or financial partnerships that is often not directly reported to the IRS. This allows many wealthy Americans to avoid paying the taxes they would otherwise owe.

By receiving data on total annual flows into and out of a bank account, the Biden administration argues, the IRS would have a better sense of who might be receiving large incomes that they aren’t reporting.

The idea has been one of many tax proposals that Democrats have been considering to help pay for the social spending bill to invest in climate programs, child care and education.

The American Bankers’ Association has objected to the plan, saying it would create unmanageable reporting burdens on the industry. House Ways and Means Committee Chairman Richard Neal has suggested in recent days that Democrats might ultimately raise the reporting threshold from $600 to $10,000.

___

Associated Press writer Hope Yen contributed to this report.

___

EDITOR'S NOTE — A look at the veracity of claims by political figures.

___

Find AP Fact Checks at http://apnews.com/APFactCheck

Follow @APFactCheck on Twitter: https://twitter.com/APFactCheck