President Biden’s budget lays out an ambitious tax and spend agenda that Democrats are currently having a hard time passing through Congress. But what tax increases do they want specifically? The Tax Foundation recently took a look at the full picture of proposed tax increases this year. Below I’ve included the tax increases Democrats hope to enact in order to finance their priorities. Taken together, these tax increases could be devastating for the economy. Here’s the full list.
Biden’s American Jobs Plan tax increases
- Increase the federal corporate tax rate from 21 percent to 28 percent and tighten inversion regulations.
- Raise the tax on Global Intangible Low Tax Income (GILTI) to 21 percent, calculate it on a country-by-country basis, and eliminate the exemption of a 10 percent return on tangible investment abroad (QBAI).
- Impose a 15 percent minimum tax on corporate book income, which would be levied on a firm’s financial profits instead of taxable income for firms with revenue over $100 million.
- Repeal the Foreign-Derived Intangible Income (FDII) deduction, which incentivizes firms to move intellectual property (IP) into the U.S.
- Provide a tax credit for certain onshoring activity and deny expense deductions on jobs that were offshored.
- Increase corporate tax enforcement.
- Eliminate certain deductions and credits for the fossil fuel industry
Biden’s American Families Plan tax increases
- Raise the top marginal rate on individuals to 39.6 percent.
- Apply ordinary income tax rates to capital gains income of individuals with more than $1 million in taxable income.
- Tax unrealized capital gains at death with a $1 million exemption for single filers and a $2 million exemption for joint filers, with additional exemptions for certain types of assets.
- Apply the 3.8 percent net investment income tax to all income above $400,000, including active pass-through income.
- Make permanent the 2017 tax law’s 4639(I) limitation on pass-through businesses’ losses above $250,000 for single filers and $500,000 for joint filers.
- Limit 1031 Like-Kind Exchange deferral for gains above $500,000.
- Tax carried interest as ordinary income.
- Increase individual tax enforcement and enact new reporting requirements for financial institutions.
That’s over 15 different tax hikes proposed in the first 100 days of the Biden administration, with more certainly coming. Fortunately for the country, Democrats in the House can only lose four votes, and Senate Democrats have zero margin of error when pushing a tax hike bill. The clock continues to tick as moderate Democrats are getting weak knees about raising taxes as the country recovers with the 2022 midterms on the horizon. So far, Democrats have been unable to change a single provision from the 2017 Tax Cuts and Jobs Act, but their list of proposed tax hikes gets longer each day.
Palmer Schoening is President of the Family Business Coalition and part of AMAC Actions advocacy team in Washington, DC.
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