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The American Families Plan: President Biden’s Next Step

On April 28, 2021, President Biden unveiled the American Families Plan. This plan, if adopted in its entirety, would make significant changes to childcare, education, family and medical leave, and tax credits for low-income households. Many of the programs that it would expand would be funded via higher taxes on high income households[1], as well as increased enforcement of current tax policies via additional funding to the IRS. The White House says additional IRS funding would “go toward enforcement against those with the highest incomes. . . . Additional resources would focus on large corporations, businesses, and estates, and higher-income individuals.”[2] This plan will also limit 1031 like-kind exchanges above $500,000 in deferred capital gains, end the preferred treatment of carried interest, and make the 2017 tax law’s limitation on excess losses that applies to non-corporate income permanent.

The American Families Plan will focus on providing the following benefits:

  • Childcare, in the form of universal prekindergarten for children 3 and 4 years old.
  • Strengthening education by providing better training for teachers, and by providing 2 years of free community college following high school.
  • Decreasing food insecurity of children, by providing free meals for children in high-poverty school districts, and by expanding access to summer EBT (Electronic Benefits Transfer) programs—programs that provide increased access to SNAP (Supplemental Nutrition Assistance Program) benefits.
  • Reforming unemployment insurance, by putting money towards “unemployment insurance system modernization, equitable access, and fraud prevention”[3]
  • Creating a national paid family and medical leave program.
  • Granting a variety of tax credits to low-income households with children.

This legislation comes as the third installment of Biden’s “Build Back Better” plan. Build Back Better consists of a series of legislation started with the American Rescue Plan that he has claimed is intended to help many Americans who have been impacted negatively by the pandemic as well as assist people who were struggling even before COVID-19 was a factor. It is still early to say if it will pass or not but the American Families Plan indicates what Biden hopes to accomplish during his time as President.

[1] Raise of the top marginal income tax from 37% to 39.5% (applies to incomes over $425,700 for single filers and $509,300 for joint filers). Taxing long term capital gains and qualified dividends as ordinary income for taxpayers with taxable income over $1 million. Taxing unrealized gains at death for unrealized gains above $1 million for single filers and 42 million for joint filers. Apply a 3.8% net investment income tax (NIIT) to active pass-through business income above $400,000. Pass-through businesses include partnerships, sole proprietorships, and S corporations.

[2] The White House Briefing Room Statements: “Fact Sheet: The American Families Plan” 4/28/2021

[3] The White House Briefing Room Statements: “Fact Sheet: The American Families Plan” 4/28/2021