The Biden Administration released its fiscal year 2024 budget today (March 9, 2023). Thanks to previews from President Joe Biden, there are no surprises as far as taxes.
"I want to make it clear I'm going raise some taxes," Biden to told a group in Virginia Beach, Virginia, who gathered Feb. 28 to hear about healthcare. "Many of you are billionaires out there. You're going to stop paying at 3 percent. Not a joke."
The president's promise was put in writing today with the issuance by the Treasury Department of "General Explanations of the Administration's FY 2024 Revenue Proposals," popularly known on Capitol Hill as the Greenbook.
The $6.9 trillion proposal would produce a $1.8 trillion deficit in fiscal 2024. However, the White House says over the long term it would reduce the federal shortfall, thanks to its tax hikes that would provide $5.5 trillion in new revenue over the next decade.
Treasury Secretary Janet Yellen reiterated her boss' tax promise in her statement accompanying the Greenbook. The programs the administration wants to fund, said Yellen, "would be more than fully paid for by requiring corporations and the wealthy to pay their fair share."
Individual tax hikes proposed: Yellen highlighted the so-called fair-share taxes that would be raised in her statement.
They include the billionaires to whom Biden referred. Dubbed the Billionaire Minimum Tax, the Greenbook proposal would impose a minimum tax of 25 percent on the wealthiest taxpayers. It would ensure, says the Biden Administration, that the top 0.01 percent "pay taxes as they go, just like everyone else who earns a paycheck."
The White House budget proposals it says will help ensure the solvency of the Medicare Trust Fund also appeared as another Greenbook spoiler from Biden in a New York Times guest essay this week. Now officially in the Greenbook is the expansion of what the administration calls Medicare tax loopholes.
A major one is the Net Investment Income Tax (NIIT). The NIIT took effect in 2013 as part of the Affordable Care Act and is collected from taxpayers whose modified adjusted gross income exceeds certain income filing-status thresholds, the highest being $250,000 for married filing jointly taxpayers. The White House also wants to expand the 3.8 percent tax, and increase by 1.2 percentage points to a total of 4 percent, on income exceeding $400,000 to cover all pass-through business income not otherwise covered by the NIIT or self-employment taxes.
The carried interest loophole allows some investment fund managers to pay tax on their earnings as if they are investment gains rather than wages. The White House wants to end this option.
The Greenbook also calls for closing estate and gift tax laws that now allow the wealthy to reduce their tax by using complicated trust arrangements to transfer their assets to their heirs.
Corporate tax targets: In addition, the Biden Administration is seeking several tax changes that would affect large businesses.
The corporate income tax rate would go to 28 percent. The Tax Cuts and Jobs Act of 2017 replaced the prior corporate income tax of 35 percent for most companies with a flat tax of 21 percent.
The White House also wants to implement a global minimum tax, which is says will strengthen the taxation of corporations' foreign income by ensuring that all multinationals pay at least the minimum rate on their earnings in each jurisdiction. This also would, says the White House, level the playing field for U.S. businesses.
The tax rate on corporate stock buybacks would be raised. The White House says this will help reduce the differential tax treatment between buybacks and dividends and encourage businesses to reinvest profits in their workers or in the company’s growth.
And in keeping with the Biden Administration's focus on green and alternative energy, it wants to eliminate fossil fuel tax preferences. The current tax breaks for the oil and gas industry distort markets by encouraging more investment in the fossil fuel sector than would occur under a neutral system, says the White House.
Where new FY24 tax money would go: The programs that the White House wants to fund, and which were highlighted by Yellen, focus on ways to help individuals and families cover expenses that many find a challenge.
The budget calls for expanding some popular existing tax credits. They are the —
- Child Tax Credit (CTC), which would be expanded through 2025, and would permanently be made fully refundable. It also would be available as monthly payments to qualifying families. During the COVID-19 pandemic, advance CTC payments were distributed by the Internal Revenue Service, and were popular among recipients. The monthly amounts, rather than making taxpayers wait to collect the credit as a lump sum when they file their annual tax returns, got the money to them when they needed it, which Biden wants to replicate. Yellen said the expanded Child Tax Credit in 2021 lifted 2.1 million children out of poverty and helped bring about a historic low in child poverty.
- Earned Income Tax Credit (EITC), which would cover more workers without children. This increased EITC benefit was in place temporarily in 2021, again thanks to coronavirus relief laws. This American Rescue Plan provision that expired would be reinstated and made permanent. Without the change, the EITC for workers without children would remain relatively small and phase out at very low incomes, meaning it really provides little or no assistance to child-free individuals at or near the poverty line. A larger EITC for workers without children would promote employment and reduce poverty for this group of workers, says the White House.
- Premium Tax Credit, which helps pay for medical coverage obtained the Affordable Care Act marketplace, would be expanded along the lines enacted in the American Rescue Plan and extended in the Inflation Reduction Act. That earlier legislation, said Yellen, resulted in a record number of people in 2021 getting medical coverage, dropping the uninsured rate to its lowest level in history.
- Low-Income Housing Tax Credit, which is the largest federal incentive for affordable housing construction and rehabilitation, would be expanded to boost the supply of affordable housing for qualifying renters.
Budget wishes + political realities = stalemate: Of course, the Greenbook is just a starting point, albeit a large one. You can read the full 226-page PDF document for more details.
Many in the divided Congress won't bother to look at it. Their minds are already made up thanks to their political positions and party affiliations. That ideological entrenchment also means that any changes to tax laws or expansion of federal programs will come, if at all, after a long and bitter political fight.
And even if none of the measures or taxes ever become law, which is the most likely outcome, you can be sure you'll hear about them again, from both sides, during the 2024 presidential campaign.
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