The latest tax plan to pay for President Joe Biden’s social spending bill would exact a minimum tax on the nation’s biggest companies and slap a surtax on the very wealthiest Americans, among other provisions.It also includes international taxation reforms, would close tax loopholes benefiting the rich and boost IRS spending to improve tax enforcement.
As Democratic lawmakers struggle to reach consensus on the details of the expansion of the social safety net, named the Build Back Better Act, trying to find ways to raise revenues has proved challenging.The latest framework for the legislation proposes changes to the tax code that would, the White House says, raise more than $1.99 trillion to cover their $1.75 trillion Build Back Better agenda over 10 years without raising taxes on small businesses or those making less than $400,000 a year, which the administration has called a red line for the president.
However, the Congressional Budget Office has not yet released any cost estimates on the plan.
Initially, Mr.Biden had wanted to increase the corporate tax rate from 21% to 28%, the top income tax bracket from 37% to 39.6% and tax capital gains for the richest Americans the same as income.But all of those proposals got the ax as negotiations wore on.A newly unveiled billionaires income tax proposal released just this week also failed to make it into the current framework.
Here’s what’s in the plan and what’s known about how each provision will work.
Surtax on multimillionaires One of the new proposals in the framework is a surtax on the wealthiest Americans.It would target the richest 0.02% of Americans, applying a 5% surtax on adjusted gross incomes between $10 million and $25 million.An additional 3% surtax would also be applied to those with an adjusted gross income of more than $25 million, bringing the total surtax for them to 8% before any deductions
The White House said this provision alone would bring in $230 billion.
According to Tax Policy Center estimates, about 30,000 filers are likely to make $10 million or more next year and about 12,000 of them are expected to make at least $25 million.
Corporate profits minimum tax The plan also includes a 15% corporate profits minimum tax which was unveiled earlier this week by Senators Ron Wyden, Elizabeth Warren and Angus King.This would hit the profits of the largest corporations that report more than $1 billion in profits annually to their shareholders.The Biden administration included a similar book tax on corporations in their original proposal.
The White House claims this will reach into the pockets of reach into the pockets of companies that are not paying their fair share because they report one number for tax purposes — and boast about another higher number on earnings calls for on earnings calls for shareholders.According to the senators who proposed the measure, this would impact about 200 of the largest companies.
The White House believes this would raise $325 billion.Senators Joe Manchin and Kyrsten Sinema, who have raised concerns over other efforts to raise corporate taxes, have both signaled support for the measure.
There’s also a 1% excise tax excise tax on corporate stock buybacks.Publicly traded companies sometimes buy back outstanding shares of their stock when they have extra cash, reducing the number of shares on the market and raising the price of the shares, which benefits shareholders.This practice isn’t taxed, although some revenue comes into Treasury’s coffers when shareholders sell their stock back, since they pay capital gains taxes.The White House would levy the tax on companies, collecting 1% of the amount of a company’s buyback.This, the White House said, would raise an additional $125 billion.
International corporate tax reforms While the White House included some new tax proposals on the largest corporations and wealthiest Americans, the administration also continues its push for international tax reforms.
The latest framework includes the proposed 15% global minimum tax which the Biden administration argues would stop the so-called race to the bottom and eliminate incentives for companies to ship profits overseas.One hundred thirty-six countries have already signed on to the new international agreement.The White House estimates the international taxation reforms would offset the cost of their social spending agenda by $350 billion.
Increased IRS enforcement The largest estimated revenue-raiser in the new White House framework is increased IRS tax enforcement.The Biden administration continues to call for more money to help the IRS close the tax gap, which is the difference between what taxpayers owe and what is collected.According to the Treasury Department, the U.S.could lose $7 trillion in revenue over the next decade from failure to enforce the tax laws.
It also estimates the top 1% evade paying $163 billion in taxes a year.
The administration wants $80 billion for the IRS to hire more specialized agents to root out tax evasion and modernize the agency’s technology.The White House estimates this would help bring in an additional $400 billion over the next ten years.
SALT — state and local tax deduction While Democrats are still negotiating over the Build Back Better agenda, the latest tax framework is the closest Democrats have come to date to reaching consensus on a plan where they need every party member in the Senate to sign off to pass a deal.There is another provision that has not been included in the framework that some Democrats are still pushing for in the final agreement, and that’s the repeal of the $10,000 cap on the state and local tax deduction — commonly known as SALT — that was imposed during the Trump administration and that largely affects wealthier individuals who live in coastal states and pay the highest property taxes.
But unlike the other measures in the framework, the repeal of the SALT cap would end up costing Treasury, since it would increase the amount people with high property taxes could deduct.Over a decade, according to a 2019 analysis by the Center for Budget and Policy Priorities, the cost of repealing the cap would be nearly $600 billion.
Trending News What’s behind the push for a fourth stimulus check Minneapolis set to vote on the future of its police department Intel agencies unlikely to find COVID origins without new information Iowa workers fired for refusing vaccine eligible for unemployment benefits New York Attorney General Letitia James announces run for governor Sarah Ewall-Wice CBS News reporter covering economic policy.
Twitter.
