The infrastructure proposal includes a number of other tax-related items, including denying expense reductions related to offshoring, enacting a minimum tax on large corporations' book income and ramping up tax enforcement against large corporations, among others.
It's important to note that Biden's plan is not the only one in discussion. Some are even more aggressive - representing the more progressive wing of the Democratic Party.
Sen. Sanders, who now chairs the Senate Budget Committee, introduced two bills on March 25 that would increase taxes for corporations and high-net-worth individuals by an estimated $2.8 trillion over the next ten years. The first Sanders proposal would return the corporate tax rate to 35% from the current 21% rate to raise an estimated $1.3 trillion over ten years. The bill would also change the way multinationals are taxed and raise $1.02 trillion over 10 years and tighten rules on companies that move operations offshore to reduce their tax liabilities.
The second Sanders proposal focuses on high-net-worth individuals and families, and it would reduce the estate tax exemption to $3.5 million. The bill would also put a $1 million lifetime cap on gift tax exemption. Sanders also proposes raising the estate tax rate starting at 45% and increasing to 65% based on the size of the estate. The draft estate tax bill would raise and estimated $430 billion during the next decade.
Sen. Warren’s proposed legislation, the Ultra-Millionaire Tax Act, would establish a new annual tax of 2% of household wealth above $50 million and a 1% surtax (3% tax overall) on the net worth of households and trusts above $1 billion. The bill would also impact households with earned income above $400,000 or for capital gains income above $1 million. Warren projects her proposal would raise as much as $3 trillion, and states that a wealth tax is popular among voters on both sides of the aisle. The Ultra-Millionaire Tax Act also includes a gigantic increase in IRS funding by an average of $10 billion per year for the next ten years to hire more auditors and tax collectors, upgrade computers and improve taxpayer service. This represents an 87% increase over the President’s FY2020 budget request of $11.472 billion.
The legislation introduced by Sanders and Warren and Biden's infrastructure proposal represent the initial skirmishes of what will be a long debate that will likely end in the budget reconciliation process next fall. And while these bills face long odds against passage in their current form, they begin to reveal where the new Democratic majority is headed with respect to tax changes.
Waller tax attorneys will be monitoring and reporting on developments to reshape the Internal Revenue Code and providing insight and analysis as tax legislation begins to take shape. We encourage you to visit this site regularly and sign up to receive tax reform alerts as they happen.
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