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Tag Archive for Proposed Tax Increases

Biden Administration Tax Reform Proposals 2023 Raises Your Taxes To 28% Corporate Rate And 39.6% Individual Rate!

Bidens Proposed Tax Increases

The Department of Treasury has published a 120 Page Report on General Explanations of the Biden Administration’s Fiscal Year 2023 Revenue Proposals. After reviewing this report it is apparent why so many wealthy individuals/families are turning to Opportunity Zones.

The Biden Administration wants to do the following:

Reform Business And International Taxation

  • Raise The Corporate Income Tax Rate To 28%
  • Adopt The Undertaxed Profits Rules
  • Provide Tax Incentives For Locating Jobs In U.S.
  • Remove Tax Deductions For Jobs Overseas
  • Prevent Basis Shifting By Related Parties Through Partnerships
  • Conform Definition Of Control With “Corporate Affiliation Test”
  • Expand Access To Retroactive Qualified Electing Fund Elections
  • Expand The Definition Of Foreign Business Entity To Include Taxable Units

Supporting Housing And Urban Development

  • Make Permanent The New Markets Tax Credit
  • Allow Selective Basis Boosts For Bond Financed Low Income Housing Credits Projects

Modify Fossil Fuel Taxation

  • Eliminate Fossil Fuel Tax Preferences
  • Modify Oil Spill Liability Trust Fund Financing And Super Fund Excise Taxes

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Certain Tax Increases And Fixes Needed For Equity And Fairness

Certain Tax Increases And Fixes Needed For Equity And Fairness
Tax reform discussions in Congress for the week of October 17 have included possibly not including tax increases. Are taxes too high already? Perhaps. But they are also quite uneven in their application.  Here are a few examples:

 

  • Vastly different rates exist for capital gain versus ordinary income for very high income individuals. A wage earner with over $400,000 of earned income will enter a 37% marginal rate today (39.6% after 2025). In contrast, a person with capital gain and dividend income will be in a marginal rate of 23.8%. This is a frequent question I get from both students and practitioners – why are capital gains taxed lower than ordinary income. There are reasons, but I don’t think it supports a difference once income passes the $500,000 level.* Tax it all the same after some high level such as $400,000 or more.  And that high income wage earner will have 2.9% Medicare tax on income above $147,000 (figure for 2022) and an additional 0.9% on income above $200,000 ($250,000 if MFJ).  So a capital gain rate of 37% (or 39.6% once AGI exceeds $1 million as President Biden proposes (see page 8 of this table)), causes the high wage earner and high capital gain recipient to both be at a marginal rate of 43.4%. Note that I am only talking about very high income individuals (less than half of the top 1% of individuals).
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The American Families Plan Big Tax Increase

American Families Plan

According to Wikipedia, The American Families Plan is a proposal by U.S. President Joe Biden to significantly increase federal spending in areas related to childcare, paid leave, pre-kindergarten, community college and healthcare, funded by increased taxes on high-income Americans. It is the third part of Biden’s three-part “Build Back Better” agenda, with the first being the American Rescue Plan and the second the American Jobs Plan. It was unveiled on April 28, 2021.

It would be at least partially funded by a number of tax hikes on high-income Americans and investors, including restoring the top marginal income tax rate to its pre-2017 level of 39.6% and nearly doubling the capital gains tax for people earning more than $1 million, as well as eliminating a provision in the tax code that reduces capital gains on some inherited assets, like vacation homes. It would also raise revenue by boosting the budget of the Internal Revenue Service by $80 billion (distributed over ten years), which the White House estimates could raise over $700 billion in revenue that otherwise would have been lost to tax evasion.

(We ask the tax professional community and taxpayers to comment on this proposal for increased tax hikes. What do you think?)