The Biden administration has proposed two tax plans; the American Families Plan and the Made in America tax plan. The two plans seek to modify personal and corporate taxation. No action is needed at this time as neither proposal has been made law.
Highlights from American Families Plan
Tax funding proposals included in President Biden’s American Families Plan are designed to fund a $1.8 trillion “investment in our children and our families.” You can find a summary of the American Families Plan, published by the White House on April 28, 2021, by clicking here.
Highlights include:
- Tax Cuts for America’s Families and Workers
- Permanently extend the Affordable Care Act premiums tax credit in the American Rescue Plan
- Expand the Child Tax Credit from $2,000 per child to $3,000 per child for six-year-olds and above, and $3,600 per child for children under six through 2025.
- Make permanent the full refundability of the Child Tax Credit.
- Permanently increase tax credits to support families with child-care needs. For children under the age of 13, families making less than $125,000 per year will receive a tax credit for as much as half of their spending on qualified childcare up to $4,000 for one child or up to $8,000 for two or more children.
- Permanently extend the expansion of the earned income tax credit for childless workers.
- Increase Taxes on the Highest Incomes by Increasing the top tax bracket of 37% to 39.6%
- Tax income from long-term capital gains and certain dividends at ordinary tax rates for households making over $1 million.
- Repeal the step-up in basis of inherited assets at death for gains greater than $1 million ($2.5 million per couple when combined with current law exemptions for real estate). It does mention there would by special rules to protect family-owned businesses and farms.
- Stricter Reporting and Enforcement with increase investment in the IRS.
Highlights from Made in America Tax Plan
The Made in America Tax Plan proposes tax increases on many corporations and businesses with international operations that could raise over $2 trillion in tax revenue in the next 15 years.
Highlights include:
- Increase the corporate tax rate from 21% to 28%
- An increase in the global minimum tax on multinational corporations to 21%, calculated on a country-by-country basis in order to limit the ability for corporations to offset losses incurred in one country against income earned in another
- Seeking a global agreement on minimum tax; President Biden is encouraging other countries to adopt their own minimum taxes on corporations
- The Biden administration will seek a global agreement through the Organization of Economic Cooperation and Development that the world’s largest multinational businesses pay taxes to their national government based on local sales- regardless of their physical presence in any other country.
- Reducing the expense deduction that U.S. companies can claim when offshoring jobs; and providing tax credits to U.S. companies to support onshoring jobs
- Repealing the “Foreign Derived Intangible Income” (FDII) provisions of the Tax Cuts and Jobs Act and using the resulting revenue to expand research and development investment incentives
- Repealing BEAT and replace with SHIELD (Stopping Harmful Inversions and Ending Low-Tax Developments). SHIELD would, among other provisions, preclude the deduction of payments to related parties subject to a low effective rate of tax in a foreign jurisdiction.
- Adopting a 15% minimum tax on the book income of large corporations
- Eliminating subsidies, tax preferences, and special tax credits for the fossil fuel industry
- Increasing enforcement by making sure the Internal Revenue Service has the resources it needs to enforce tax compliance of corporations
Both plans face an uphill battle getting through Congress even with a Democratic majority. Moderates have become the linchpin to success or failure for President Biden’s proposals. As the picture becomes clearer and any action becomes necessary we will keep you posted.