President Biden’s proposed fiscal year 2024 federal budget proposes $4.5 trillion in additional taxes and resurrects previous proposals, such as eliminating like-kind (Sec. 1031) real estate exchanges. The carried-interest tax break is also proposed for elimination under the Biden plan. In addition, the plan would end a provision that allows wealthy individuals to accumulate savings in tax-favored retirement accounts intended for middle earners. Biden would limit the amount taxpayers with incomes of more than $400,000 can hold in Roth individual retirement accounts.
The budget proposal would increase the capital-gains rate to 39.6 percent from 20 percent for people earning at least $1 million. That, and applying an additional surcharge to fund Medicare, would mean taxes on investments could rise to almost 45 percent. Biden is proposing a 25 percent minimum tax rate on the wealthiest 0.01 percent of taxpayers, who currently pay an average of 8 percent. Also, Biden is proposing to raise the top personal-income tax rate to 39.6 percent, from 37 percent, for those making more than $400,000. The 2017 corporate-tax cut would get significantly rolled back, bringing the top rate to 28 percent from 21 percent. The plan additionally proposes to quadruple the recently enacted 1 percent excise tax on stock buybacks to 4 percent.
The tax proposals, which are at the center of what the White House estimates is a $3 trillion deficit-reduction plan, were immediately rejected by congressional republicans. “The president’s budget is replete with what they would do if they could,” Senate Minority Leader Mitch McConnell said. “Massive tax increases, more spending … will not see the light of day.” (Bloomberg)
NEW MEDICARE TAXES
President Biden’s budget also proposes hiking payroll taxes on Americans making over $400,000 per year. The budget proposes raising Medicare taxes from 3.8 percent to 5 percent on annual income above $400,000. Biden’s plan would also eliminate a tax provision that allows certain business owners who receive income through an S corporation, limited liability company or limited partnership to avoid paying Medicare taxes on some of their income. The president's proposal, which would also give the government new power to negotiate drug prices, would extend the solvency of the Medicare trust fund beyond 2050, the White House says. Biden’s plan has little chance of becoming law, especially after republicans took control of the House of Representatives this year, but the proposal is an important signpost for negotiations over government spending and offers the president a chance to publicly outline his priorities if he is re-elected in 2024. (ThinkAdvisor)
SOME DEMS DON’T WANT THIS FIGHT
The Biden administration’s proposed budget will trigger a fight over raising taxes, something that Senate democrats who face a tough road ahead to protect their majority aren’t clamoring for, especially in Arizona, Montana and West Virginia. Democrats campaigned on repealing the Trump-era tax cuts ahead of the 2020 election but fell short after Sens. Kyrsten Sinema (I-AZ) and Joe Manchin (D-WV) balked at key elements of Biden’s tax plan, such as raising the corporate tax rate to 29 percent and the top marginal income tax rate to 28 percent. Sen. Ben Cardin (D-MD), a member of the finance committee, said Biden’s plan includes many of the same proposals he pushed in 2021 and 2022, but they have virtually no chance of passing a divided Congress.
“As far as the effort we made last Congress to undo some of the rates from the 2017 [tax law], we were unsuccessful, and we had control of the House. I don’t see us getting very far this year,” Cardin said.
Presidential budget proposals are only suggestions, as the House and Senate will enact their own spending plans that do not require presidential approval. (The Hill)
This report was compiled by the Alternative & Direct Investment Securities Association (ADISA). Visit the ADISA website (http://adisa.org/home) to stay current on all of the organization’s advocacy initiatives.