Bloomberg
Biden’s likely tax gains are increases in personal fees, audits of the wealthy
(Bloomberg) – Democrats are likely to succeed in raising personal income tax rates and strengthening audits of wealthy Americans as they work on revising the US tax code in the coming months. This is an important finding from a survey of 15 current and former White House and congressional advisers who specialize in tax policy completed by Bloomberg this month. A tax on unrealized capital gains, as envisaged by the chairman of the Senate Finance Committee, Ron Wyden, was considered impossible to pass through Congress, the survey showed. President Joe Biden is planning what would amount to the largest set of tax increases since 1993 to help pay for infrastructure, clean energy and social initiatives as part of his long-term follow-up to the $ 1 pandemic relief package. , 9 trillion. With Republicans expressing opposition, Democrats must secure the support of their moderate members in the 50-50 Senate, making the tax program politically challenging. “There is a very strong consensus to tax more the wealthy and corporations – but a very strong consensus means that you need to get all 50,” said Steven Rosenthal, senior researcher at Urban-Brookings Tax Policy Center and former attorney for the Joint Committee on Taxation. “Tax increases are difficult, even good tax increases. Raising taxes hurts some people. ”An increase in corporate taxes, considered a key component of Biden’s plan, was seen as slightly more difficult to implement than raising individual rates, with expanded property taxes just behind. The most likely tax change of all, according to experts, is an extension of credits for families, something that would increase the total costs of the program. Another easy victory, suggests the research, is the strengthening of inspection in the Federal Revenue. Treasury Secretary Janet Yellen said on Tuesday that, along with changes in the tax policy of the administration’s plans, she would support funding to intensify IRS collection efforts. The following is a classification of fiscal measures, from the most likely to be passed by mid-November 2022 to the least likely elections. Respondents were asked whether each item would likely be approved, eligible for approval or not. With three points likely, the maximum score is 45.1. Family tax credits (45 points) All 15 survey participants considered that the expansion of tax credits for families is likely to pass. This was already a component of the pandemic relief bill signed this month. This represented a one-year expansion of child tax credit, dependent assistance credit and earned income tax credit. Democratic lawmakers want to make these changes permanent – which would result in a $ 1.6 trillion price just for child tax credits, according to an estimate by the Tax Foundation. Democrats expect the 2021 increase to be so popular with voters that they can guarantee an extension beyond this year. IRS audits (44) IRS audit fees have plummeted in recent years, with Commissioner Chuck Rettig telling a Congressional panel earlier this month that the agency has lost 15,000 oversight officials since 2010. Democrats in Congress have proposed ways to increase audit levels by increasing the agency’s workforce and demanding higher exam fees for the best winners. Charging unpaid taxes with only the richest 1% could generate an additional $ 175 billion in tax revenue, according to a recent study.3. Individual income (42) Biden in the election campaign asked to raise the maximum personal income tax rate to 39.6% for those who earn $ 400,000 or more. However, management has not yet specifically defined the limits for individuals and families.4. Corporate Tax (38) Biden is pushing to reverse part of President Donald Trump’s massive corporate tax cut from 2017, raising it from 21% to 28%. This could raise $ 727 billion over a decade, according to the Urban-Brookings Tax Policy Center. Some respondents doubted that the magnitude of an increase could pass through Congress, indicating that it could end at around 25% .5. Levy on Estates (36) Biden’s campaign trail proposals reduced the limit on which the property tax applies, in addition to raising the rate to 45%. David Kamin, deputy director of the White House National Economic Council, indicated separately in an interview last week that the government is seeking to remove a “loophole” for the ultra-wealthy known as a step-up-in-basis – which reevaluates assets such as shares and real estate at market prices, rather than their original purchase cost, reducing tax obligations.5. Made in America Credit (36) Tying fifth on the list as most likely to be enacted is pressure from Democrats for tax breaks for companies that build factories in the US or increase domestic production capacity. Both changes would verify two priorities: addressing inequality of wealth, as well as providing incentives for jobs at home.6. SALT Cap (34) Since Trump’s 2017 tax review limited federal casualties to state and local taxes, or SALT, to $ 10,000, Democrats have sought to reverse the change. It proved to be a controversial – and expensive – task because the benefits flow in large part to those who earn more. Survey respondents said it is possible for Democrats to bring about change, but it may just be a higher limit, rather than a complete repeal. Yellen said on Tuesday that he would work with lawmakers to deal with “disparate treatment” stemming from the cap.7. Minimum foreign income tax (31) Biden’s campaign plan saw an increase in the tax rate on profits that American companies earn abroad from 13% to 21%, undoing a change made by Trump in 2017 and raising US $ 442 billion in the suit, according to Brookings’ Urban-Estimates. Republicans and corporate advocates say that raising tax rates on domestic and offshore income could cause American companies to move to other countries where tax laws are more favorable. The idea of a global minimum tax is also currently the subject of negotiations between the United States and about 140 other countries in the Organization for Economic Cooperation and Development, so that the United States could also adopt some changes in international tax legislation to comply with a resolution that expects to be achieved later this year. Capital gains tax (30) Biden made higher capital gains taxes for those who earn $ 1 million or more in a centerpiece of their tax plan. “Wealthier Americans can totally escape taxes on large amounts of their income from wealth,” Kamin in the interview. Biden talked about a plan that would increase the capital gains tax rate from 23.8% to 39.6%, which could generate an estimated revenue of US $ 373 billion. But the idea is politically complicated because Congress has granted special discounts on investment income since 1921.9. Itemized deductions (24) Biden’s campaign plan limited the itemized tax incentives to 28%, or 28 cents for every dollar of income, for those earning more than $ 400,000. He also called for the reinstatement of yet another deduction limitation that has been temporarily suspended since the 2017 tax law, which prevents taxpayers from making legal tax maneuvers to evade taxes altogether. Critics say it would hurt small business owners who largely pay taxes on their businesses through personal tax returns.10. Minimum tax on profits (22) Biden has sought to resolve situations in which large technology companies, such as Amazon.com Inc, Netflix Inc. and Zoom Video Communications Inc., have largely been able to avoid paying federal income taxes in a few years, despite turning a profit because they used legal maneuvers, including lower business expenses, to reduce their tax bill. Biden campaigned to impose a minimum tax of 15% on companies’ accounting profits. The move would end decades of differences in the way companies calculate their finances for tax purposes and faces significant obstacles to becoming law.11. Payroll tax for those earning the most (20) Biden campaigned to institute higher payroll taxes on incomes over $ 400,000 as a means of increasing Social Security funding. Currently, payroll fees apply only to revenues of up to $ 142,800. However, the idea is unlikely to meet the rules for a budgetary reconciliation bill – the vehicle that Democrats would need to use to defeat a Republican obstructionist – making his probability remote.12. Wealth Tax Lite (17) Although Biden avoided Senator Elizabeth Warren’s wealth tax plan, there is broader support for some efforts to target asset ownership. Wyden, an Oregon Democrat and head of the Senate’s powerful finance panel, asked the White House to consider its plan to require wealthy individuals to pay taxes on unrealized earnings from stocks, bonds and other assets annually, rather than when they go. sold. The idea was criticized for being too difficult for the IRS to manage and enforce. Pending forecasts With specific government tax plans still pending, many Wall Street banks have yet to set their expectations. “We do not have a vision of the house on the financing mix of an eventual infrastructure bill, but all public comments point to higher taxes in the main areas of companies, high-income families and the rate of capital gains”, they led JPMorgan Chase & Co. strategists by John Normand wrote in a note on Friday. (Updates with JPMorgan’s comment in the final paragraph.) For more articles like this, visit us at bloomberg.comSubscribe now to stay on top of the most trusted business news source. © 2021 Bloomberg LP