‘I Don’t Think of Myself as Rich’: The Americans Crossing Biden’s $400,000 Tax Line

President Biden is back on the campaign trail, and so is his favorite tax-policy number: $400,000.

In his successful 2020 presidential run, Biden pledged to protect households from tax increases if their income was below that threshold. He reupped the promise for his re-election bid and is planning to draw tax-policy contrasts with Republican rival Donald Trump in a Tuesday speech in Pennsylvania.

If Democrats have any power next year, the $400,000 cutoff will be the floor in negotiations over who pays more and who doesn’t. Have income below that and you will be spared. Above that line, and your 1040 is on the menu as Democrats seek trillions of dollars for new programs and middle-class tax cuts.

Republicans are campaigning for extending expiring tax cuts enacted in 2017 at all income levels, while Biden and Democrats say they will protect at least the bottom 97% of households from higher taxes. The competing antitax pledges appeal to voters’ pocketbooks while limiting debate to the top sliver of households and restricting policymakers’ ability to generate revenue.

In particular, the Biden pledge’s persistence highlights shifting political coalitions as affluent suburban voters drift from the Republican Party. Biden’s promise helps Democrats reassure upper-middle-class Americans that they can vote for the party without risking their bank accounts. But it also limits Biden’s tax policies and gives critics a ready target.

Notably, Biden isn’t adjusting the $400,000 to account for inflation during his first term, keeping the round number he started with. That amount in May 2020, when Biden articulated the plan, is equivalent to more than $487,000 now.

Because of inflation and economic growth, the pool of $400,000-and-up households increased to 3.4 million in 2022, up 33% from 2019, according to census data analyzed by the Economic Innovation Group, a Washington, D.C., think tank. The percentage of households above that line climbed to 2.6% from 2.1%.

Ginger Freitas accepts that voting for Biden might increase her tax bill.

“If I’m going to say that I am somebody who thinks that government should provide a social-safety net and society is better off when we all chip in, then I feel like I need to suck it up and put my money where my mouth is,” said Freitas, a 42-year-old human-resources director in Walnut Creek, Calif.

On paper, she said, her and her husband’s combined income of around $400,000 should make them well-off. But it doesn’t feel that way. She attributes this to high California living costs and some childhood financial instability, which created a fear of not having enough money.

“For San Francisco, I don’t even know what upper-middle class is considered anymore,” she said. “It’s probably somewhere in the 500s.”

Biden’s pledge is often interpreted as a bright line between “middle class” and “rich,” but it wasn’t intended that way. According to administration officials, $400,000 was set so middle-class households can see they will be comfortably below it.

“It put in very precise terms who was intended to benefit,” said Ben Harris, a campaign aide during 2020 and an assistant Treasury secretary in the Biden administration. “It was less a definition of who was rich and more a value judgment about rewarding work and labor.”

Compared with the full population, households with incomes above $400,000 are more likely to include children, and they are disproportionately white and Asian-American. They are also concentrated in urban areas. In Washington, D.C., in 2022, 6.1% of households were above the line; in Mississippi, 0.8% were.

“Those people the president made a promise to are no longer covered,” said Mike Palicz, director of tax policy at Americans for Tax Reform, the group headed by antitax advocate Grover Norquist, which issues regular updates on the eroding $400,000 standard. “It makes it very simple for us to show when the president’s breaking his word.”

Aaron Littles feels unfairly targeted by the $400,000 cutoff, which seems arbitrary to him.

“I don’t think of myself as rich. I think of myself as having worked really hard,” said Littles, a 41-year-old executive at a healthcare-staffing company in Tampa, Fla., whose pay has fluctuated around $400,000.

“I’ve hit the American dream and now I’m going to have to pay more taxes,” he said. “That doesn’t feel great to me. It’s demotivating.”

Littles plans to vote for Trump, the former president and presumptive Republican presidential nominee, and said that if taxes increased during a second Biden term, he would meet with his accountant to explore ways to lower his tax bill.

‘Read my lips’

Tax increases on rich people are popular, but for decades, Democrats struggled to compete against ascendant antitax policies from Republicans.

The GOP’s tax position hardened in the 1990s, after President George H.W. Bush broke his “Read my lips: no new taxes” pledge in a bipartisan budget deal. Bush’s moderate faction lost the subsequent intraparty fight and Republicans embraced a restrictive antitax pledge pushed by Norquist.

Democrats lacked an effective comeback. Law Prof. Michael Graetz pegs the Biden pledge’s origins to a 2008 presidential debate between Hillary Clinton and Barack Obama, who both promised to block tax increases on households making under $250,000.

“It’s a testament to how successful the antitax movement has been, because Republicans won’t tax anybody and Democrats won’t tax 98% of anybody,” said Graetz, author of a new book on antitax politics.

Obama won and largely stuck to the $250,000 level. Critics pointed to several pieces of the Affordable Care Act as pledge-breaking promises, including limits on flexible-spending accounts and an indoor-tanning tax. Biden updated the figure to $400,000 and made it a staple of his stump speeches.

In Louisville, Ky., $400,000 feels like plenty to David Deyer.

“We have it pretty nice in the Kentucky area,” Deyer said. He and his wife are about $25,000 under the threshold.

The 33-year-old, who works in business development for an HVAC contractor, said they can travel internationally and make monthly charitable donations on par with their mortgage payments.

Deyer said he could afford higher taxes but doesn’t think of himself as rich. He and his wife make coffee to avoid Starbucks and buy fruit based on what is on sale.

“​​We’re not extravagant people with high-end country-club memberships or a private jet or anything like that,” he said. He declined to say who he is voting for.

Tax cheats let off the hook

Implementing the simple-sounding $400,000 campaign promise proved complicated for the Biden administration, requiring multiple income definitions.

Biden’s formulation is particularly restrictive because it doesn’t apply to households under $400,000 as a group. Instead, it requires that no household pay more. That prevents many possible policies, spurring criticism from progressives and Democratic deficit hawks.

For example, Republicans’ 2017 tax law—a $1.5 trillion net tax cut—would have violated the Biden pledge because some middle-income families saw tax increases. Extending that law would cut taxes for most but would raise taxes on 9% of households compared with letting it expire, according to the Tax Foundation. Economically inefficient or needlessly complex tax breaks can’t be touched if any households below $400,000 use them. The core structure of the 2017 tax law is basically locked in for most households, because the pledge blocks almost anything but an extension for them.

For tax rates, the Biden administration uses taxable income, which comes after deductions. His latest budget starts the top tax bracket of 39.6% at $400,000 for individuals and $450,000 for married couples.

The administration uses adjusted gross income for other purposes, such as an investment-income tax.

They have used yet another definition to incorporate the pledge into tax enforcement. The administration declared that the expanded Internal Revenue Service wouldn’t increase audit rates for households below $400,000. That effectively lets some middle-class tax cheats off the hook in Biden’s attempt to ward off Republican exaggerations about tens of thousands of armed IRS agents.

The Biden administration carved some taxes out of the pledge. Corporate-tax increases don’t count, although economists agree that shareholders and workers making below $400,000 bear some of the burden. Trump is proposing new tariffs alongside his tax-cut extensions, and economists say those import levies would be felt by consumers.

The $400,000 pledge isn’t the only constraint on Democrats. While the party controlled Congress, Sen. Joe Manchin (D., W.Va.) blocked tax increases on U.S. companies’ foreign income, while Sen. Kyrsten Sinema (I., Ariz.) stopped tax-rate increases on individuals. The business-tax increases were all that advanced.

Biden said he wants to continue tax cuts for households below $400,000 and offset lost revenue with taxes on high-income households and corporations. But getting that policy through Congress unscathed could be tough, especially if Democrats from high-cost areas hold pivotal seats or Republicans control the House or Senate.

Write to Richard Rubin at [email protected] and Joe Pinsker at [email protected]