The proposal to fund the president’s sprawling spending plan mostly turns up the dial on more conventional tax policies, while trying to curb maneuvers that allow tax avoidance.
WASHINGTON — President Biden’s new plan to pay for his climate change and social policy package includes nearly $2 trillion in tax increases on corporations and the rich. But many of the more contentious and untested proposals that Democrats have been considering in recent weeks were left on the cutting-room floor.
The latest proposal reflects the reality that moderate Democrats are unwilling to back certain ideas aimed at raising money, including taxing the unrealized capital gains of billionaires and giving the Internal Revenue Service more insight into the finances of taxpayers. Ultimately, the package of tax increases mostly turns up the dial on more conventional tax policies, while adding some new wrinkles to curb maneuvers that allow tax avoidance.
“I think in terms of who they’re targeting, they did decide to target the larger population of very rich people and not just get the money from a very small group of superrich people,” said Howard Gleckman, a senior fellow at the Urban-Brookings Tax Policy Center.
Here’s a look at what’s in the new tax plan:
Taxing the rich.
Instead of a wealth tax or a special tax on billionaires, Mr. Biden rolled out a new “surtax” on income for multimillionaires and billionaires. It would effectively raise the top tax rate on ordinary income to 45 percent for the highest earners.
Those with adjusted gross income of more than $10 million would face an additional 5 percent tax on top of the 37 percent marginal tax rate they already pay. Those making more than $25 million would face an extra 3 percent surtax.
The Biden administration estimates that these tax increases would hit the top .02 percent of taxpayers and raise $230 billion of tax revenue over a decade.
The plan also aims to ensure that people making more than $400,000 are not able to use loopholes to avoid paying a 3.8 percent Medicare tax. The White House estimates that provision alone will generate $250 billion in tax revenue over the next 10 years.
Making corporations pay more.
Borrowing a page from his campaign playbook, Mr. Biden wants to impose a 15 percent minimum tax on profitable companies that have little to no federal tax liability. Many profitable companies are able to reduce or eliminate their tax liability through the use of tax credits, deductions and previous losses that can carry over. The new tax would apply to companies with more than $1 billion in so-called book income — profits that firms report to their shareholders but not to the I.R.S.
The plan is meant to ensure that the approximately 200 companies that pay no corporate income tax will have to pay some money to the federal government.
The White House estimates the provision, which was also included in a plan presented by Senate Democrats, will raise an additional $325 billion in tax revenue over a decade.
Chye-Ching Huang, the executive director of the Tax Law Center at New York University, said on Thursday that the proposal could mean that financial statements where book income is reported could become the new “locus for tax avoidance.”
A separate proposal would also enact a 1 percent surcharge on corporate stock buybacks. Buybacks have surged along with the stock market, with cash-rich firms like Apple, JPMorgan Chase and Exxon spending billions of dollars each year to buy back, then retire, shares in their own companies. That can help drive up the company’s stock price, enriching both shareholders and corporate executives whose compensation is often tied to their firm’s stock performance.
The provision is projected to raise $125 billion over 10 years.
Ending the tax race to the bottom.
Mr. Biden’s framework would raise the tax that companies pay on foreign earnings to 15 percent, putting the United States in line with a global minimum tax that is being completed at the Group of 20 summit in Rome this week.
The Biden administration initially wanted to double the current rate to 21 percent from 10.5 percent. In settling on 15 percent, the U.S. rate would match what was agreed to by the 136 countries participating in the global deal and could blunt criticism that American companies will face a competitive disadvantage.
The global agreement is meant to end corporate tax havens and stop what Treasury Secretary Janet L. Yellen describes as the “race to the bottom” of declining corporate tax rates around the world.
To deter companies from finding ways to avoid the tax, the plan would impose a penalty rate on foreign corporations based in countries that are not part of the agreement.
The Biden administration projects the international plans would raise $350 billion over a decade.
Narrowing the tax gap.
White House and Treasury Department officials have spent months pushing a proposal to narrow the $7 trillion gap in taxes that are owed by individuals and businesses but not collected. The administration initially wanted to invest $80 billion in additional enforcement staffing at the I.R.S. and require banks to hand over more information about the finances of their customers.
Under the new proposal, the I.R.S. would get more money to ramp up audits of people making more than $400,000. However, the new bank reporting proposal — which the Treasury has called critical to its ability to hunt down hidden revenue — was conspicuously absent. A lobbying campaign from banks prompted huge blowback from lawmakers, including Senator Joe Manchin III, a West Virginia Democrat whose vote is critical to passing the overall package.
Treasury officials and a group of Senate Democrats are continuing to negotiate with Mr. Manchin on narrowing the proposal in a way that he could support.
As it stands, the plan to bolster I.R.S. enforcement is projected to raise $400 billion over a decade, down from the $700 billion in the original proposal.
Reducing the deficit, maybe.
Mr. Biden said on Thursday that his plans were “fiscally responsible” and claimed that the proposals, if enacted, would reduce the country’s budget deficit.
The $2 trillion of proposed tax increases would more than offset the $1.85 trillion in spending on housing, child care and climate initiatives. However, nonpartisan scorekeepers such as the Congressional Budget Office have in the past offered less rosy projections of what Biden administration proposals might actually raise in revenue.
Additional I.R.S. enforcement personnel will take years to get up to speed, and audits could be less effective without the additional bank information the Treasury Department is seeking.
Some Democratic lawmakers are also still fighting for the inclusion of provisions that could actually cost money, including a partial or temporary restoration of SALT, the state and local tax deduction that Republicans capped in 2017. Last-minute additions such as that could add to the cost of the overall package.
"how" - Google News
October 29, 2021 at 02:07AM
https://ift.tt/3vVDqxh
How Biden’s $2 Trillion in Tax Increases Target Companies and the Rich - The New York Times
"how" - Google News
https://ift.tt/2MfXd3I
Bagikan Berita Ini
0 Response to "How Biden’s $2 Trillion in Tax Increases Target Companies and the Rich - The New York Times"
Post a Comment