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Though President Biden and his administration enjoy razor-thin advantages in Congress, the new crew in D.C. has not been shy about talking about new policy proposals that touch on many hot-button issues. One of these areas is tax policy; this was one of Biden’s central themes throughout his campaign, and his administration has been giving hints about specific policy changes Biden would approve.
Throughout the campaign, the president repeatedly claimed that he would not sign off on any tax rate increases for those making less than $400,000 per year. Biden officials have since clarified that families making less than $400,000 would be unaffected. If both you and your spouse who file jointly, for example, each make more than $200,000 per year, you might see your taxes increase.
The administration has proposed some concrete changes to the tax code in the first draft of the American Jobs Plan, which aims to address the country’s infrastructure. The bill will almost certainly be negotiated down in attempts to bring both moderate Republicans and conservative Democrats. These tax-related provisions were included in the bill’s first draft:
- An increase of the top marginal tax rate for individuals from 37 percent to 39.6 percent (pre-Trump rate).
- An increase of the corporate tax rate from 21 to 28 percent.
- A minimum tax rate of 15 percent on book income of corporations reporting at least $2 billion in annual income. Book income is the income reported to shareholders and is often quite different from taxable income.
- An increase in the tax rate on GILTI, or global intangible low-taxed income, from around 12 percent to 21 percent. GILTI is income generated by U.S. foreign affiliates’ intangible assets (such as intellectual property). This tax item was created by the Tax Cuts and Jobs Act of 2017.
Other provisions of the bill aim to inhibit the use of various deductions by U.S. companies, as many corporations do not pay anywhere near the current 21 percent tax rate. Additionally, the administration has signaled its desire to prevent offshoring of U.S. companies’ headquarters and increase the number of estates subject to federal taxes.
Finally, the Biden administration has made indications that it wants to increase the IRS’ budget. The proposed 2022 budget would give the IRS an additional $1.2 billion, which would give the agency more resources to go after high-income and corporate tax returns. The IRS has seen its budget fall around 25 percent the past decade.
A Firm That Stays Plugged In
Weisberg Kainen Mark is aware of the fluidity of U.S. tax policy and the changes that could come about from the new administration. High earners and those with foreign assets would be wise to keep tabs on negotiations in D.C. What won’t change, though, is our firm’s commitment to providing taxpayers with targeted representation during disputes with the IRS. Contact our office today to set up a consultation.
Weisberg Kainen Mark, PL
