• President Biden's proposed tax hike could harm the U.S. economy
  • His tax plan could lead to a less competitive economy globally
  • Biden's tax hike could also lead to 'marriage penalty'

President Joe Biden’s proposed tax hike could be harmful to the U.S. economy, an expert said Tuesday.

Tax Foundation President Scott Hodge appeared on Fox News’ “Your World” where he discussed the possible effects of Biden’s proposed tax plan. According to Hodge, the hike could lead to a less competitive U.S. economy.

“Overall, the tax increases that he's proposing would have serious harm to the economy and overwhelming any of the economic benefits that might come from the other transfer payments or any of the infrastructure that he's talking about,” Hodge said.

“So what you've got is a smaller economy, fewer jobs, less investment and yet a whole bunch of government spending that doesn't make up for the harm that is done by the taxes.”

Hodge also warned against the president's proposal to use the taxes to pay for the administration’s programs, saying the tax hike will not be enough to fund the spending.

“There's not enough wealth at the top in order to pay for everything they're [Biden administration] talking about. What we're going to have is a smaller economy that is less competitive globally because he's trying to pay for his infrastructure and spending programs with the most harmful taxes possible,” he added.

Experts also suggest that Biden’s tax hike, which would affect wealthy Americans, can also cause a so-called “marriage penalty.

“Marriage penalty” occurs when married couples pay more taxes together than if they filed as single taxpayers. This usually happens to couples earning similar incomes.

The current top tax rate is 37% for individuals earning over $523,600 and couples making more than $628,300. Biden's plan will raise the top rate to 39.6%, but may hide a nasty surprise for some couples filing for taxes together.

Although the White House says the tax rate hike would impact only the “top 1%, of tax payers, it may still affect individuals making less than $400,000, CNBC reported. The site said if a couple earn $260,000 each individually, they could end up paying higher taxes filing together than on their own.

But there is still no clarity on the precise income thresholds at which the 39.6% rate would kick in for single taxpayers and married joint filers. So tax experts are cautioning against knee-jerk reactions to the Biden tax proposals.

US President Joe Biden has hailed his country's vaccine rollout
US President Joe Biden has hailed his country's vaccine rollout AFP / Brendan Smialowski