President Joe Biden speaks about the Build Back Better Social Spending Bill proposed at the White House on October 28, 2021.
Chip Somode Villa | Getty Images News | Getty Images
White House Publish framework It will submit a $ 1.75 trillion social and climatic spending bill on Thursday, more than half of which will come from tax reforms targeting wealthy Americans.
The plan is to increase income by taxing people who earn more than $ 10 million a year, raising taxes on some high-income business owners, and strengthening the IRS’s tax enforcement. Overview..
This framework was the product of months of negotiations between moderate and progressive Democrats.Together, the proposals for wealthy taxpayers Increase About $ 1 trillion out of about $ 2 trillion in total revenue raised. (The rest will come from, for example, new taxes on companies and stock repurchases.)
President Joe Biden said the bill has been paid in full and will help reduce the federal budget deficit.
“I don’t want to punish someone’s success. I’m a capitalist,” Biden said in a speech Thursday. “All I want is to pay your fair share.”
Biden reiterated that households with an annual income of less than $ 400,000 will not “pay more than a penny” in federal tax and are more likely to receive a tax cut from the proposal. Enhanced child tax credit, And reduced child and health care costs.
The framework omits details beyond the high level of detail. However, despite the same comprehensive policy objective of targeting the wealthy, it seems to have abandoned many tax proposals issued by the Houseways and Means Commission last month.
For example, the framework does not raise the current top 37% income tax rate or the maximum 20% tax rate on investment income (except for millionaires subject to the proposed additional tax). It also does not, for example, impose new required distributions from large severance pay accounts or change inheritance tax or trust rules.
“It’s much slimmer,” said Kyle Pomerlot, a senior researcher at the American Enterprise Institute, a right-wing think tank. “It has abandoned much of what they proposed in the House bill.”
Of course, the proposal requires nearly unanimous support from Democrats in the House and Senate, given their very thin majority, and it Not sure if there is full party support..
Here are some of the main rules of the Build Back Better framework:
According to the White House, the plan will impose a new additional tax on the top 0.02% of Americans.
If your total adjusted income exceeds $ 10 million, you will be subject to a 5% surcharge, and if your total income exceeds $ 25 million, you will be subject to an additional 3% (or a total of 8% surcharge).
The surcharge is estimated to raise $ 230 billion over a 10-year period.
“This is one of the key rules here to tax HNWIs directly,” said Garrett Watson, senior policy analyst at the Tax Foundation.
It will affect far more people than another tax imposed by the Senate Democrats on the wealth of millionaires earlier this week.That tax is About 700 people were affectedOn the other hand, Watson estimates that a millionaire’s additional tax will probably affect hundreds of thousands of people.
Basically, an 8% surcharge means that the highest-income earners pay the top 45% federal marginal income tax rate on wages and business income. (They currently pay 37%.)
They also pay the top 28% federal tax rate on long-term capital gains and dividends, plus the existing 3.8% net investment income tax on high-income earners. (Taxes on long-term capital gains apply to the growth of shares and other assets sold after one year of ownership. The maximum tax rate is currently 20%.)
According to Watson, the tax seems to apply to “adjusted total income” rather than “taxable income.”
This is because the AGI index reflects income before it was reduced by charitable donations or other tax deductions. This means that the additional tax will include more taxpayers.
SOPA Images | LightRocket | Getty Images
Democratic plans will invest in IRS enforcement to fill the so-called tax gap.
According to the White House, the top 1% avoid more than $ 160 billion in taxes annually.
According to Watson, you can earn more income from uncertain sources, such as tax returns and certain business agreements that are not subject to tax withholding, compared to other taxpayers.
According to the White House, the IRS will track wealthy tax evaders, review technology in the 1960s, and hire executive agents trained to invest in taxpayer services to help ordinary Americans.
These measures are estimated to raise $ 400 billion over a 10-year period. This is the largest source of revenue for the proposal.
But there is also the question of how lawmakers reached that amount of income.Ministry of Finance Estimated Last month, the $ 80 billion IRS investment was said to generate $ 320 billion in revenue over a 10-year period.
The Build Back Better framework has two provisions related to business revenue.
One applies a 3.8% Medicare surcharge on all income from pass-through businesses, and the other limits tax cuts for high net worth business losses.
It is estimated that the reform will raise $ 250 billion and $ 170 billion, respectively, over a decade.
Currently, most pass-through business owners are subject to a 3.8% self-employed or net investment income tax. (Sole proprietors, partnerships, and other such companies pass revenue to the owner’s individual tax return.)
However, some benefits (that is, S corporation) Is not subject to the 3.8% net investment income tax created by the Affordable Care Act to fund the expansion of Medicare. This proposal will close this loophole for wealthy business owners. (The proposal does not specify an income threshold.)
The second proposal is also somewhat vague about business losses. However, last month’s property tax proposal, which includes similar measures, may provide clues. It permanently prohibits excessive business losses (that is, net tax deductions in excess of business income).
This applies to businesses that are not configured as a company.
Here’s how Biden’s BuildBackBetter framework taxes the rich:
Source link Here’s how Biden’s BuildBackBetter framework taxes the rich: