Revamped Biden Tax Plan Includes New Surtax on Millionaires (1)

Oct. 28, 2021, 4:27 PM

The White House on Thursday issued a revamped outline of $2 trillion worth of ideas to pay for President Joe Biden’s social-spending agenda, including new levies targeting large corporations and millionaires.

As telegraphed in Democratic lawmakers’ negotiations in recent days, the outline notably excludes increases in the corporate income-tax rate and the top marginal income-tax rate -- leaving the bulk of former President Donald Trump’s 2017 reductions intact. Also missing is Biden’s plan to end a benefit that allows assets to be passed to heirs without taxing their capital gains.

Changes could still be made as congressional Democrats wrangle the final legislative text. Senate Finance Committee Chair Ron Wyden said he’s pressing on with his proposal for a new annual levy on the appreciation of billionaires’ wealth. And advocates of an expansion of the federal deduction on state and local taxes remained confident Thursday that their priority will be addressed.

The following are the tax items included in a fact sheet released by the White House Thursday morning, with estimates for revenue over a decade.

15% Corporate Minimum Tax ($325 billion)

The new levy would put a 15% minimum tax on the financial statement profits of companies who have little-to-no taxable income.

Stock Buybacks Tax ($125 billion)

This tax would put a 1% surcharge on stock buybacks to encourage companies to invest in their operations rather than re-purchase shares.

Stronger International Tax Rules ($350 billion)

The framework calls for a 15% country-by-country global minimum tax. The new rules would also impose penalties on foreign corporations in countries that don’t impose the minimum tax rate.

Millionaires Surtax ($230 billion)

The new surtax would place a 5% levy on incomes above $10 million and an additional 3% on incomes above $25 million, on top of the top tax rate, which is currently 37%. About 0.02% of Americans would be affected, according to the White House.

Expand Medicare Tax on Wealthy ($250 billion)

The plan would close provisions in the tax code that allow some wealthy taxpayers to avoid paying the 3.8% Medicare surtax on their earnings.

Limit Business Losses ($170 billion)

This provision would limit excess business losses for partnerships, limited liability companies and other pass-through entities.

IRS Enforcement ($400 billion)

The IRS would receive more funding to hire more revenue agents, modernize technology and update customer service to increase tax compliance. Expanded audit capabilities would be targeted to those making more than $400,000 a year, according to the fact sheet.

Prescription Drug Savings ($145 billion)

The plan would end a Trump-era rule that allows drugmakers to offer rebates to pharmacy benefit managers.

Questions Outstanding

There was no mention of a billionaires’ tax, a proposal pushed by Wyden but seen by a number of other Democratic lawmakers as difficult to craft and administer.

“I’ll be working with the administration so you don’t end up with a situation where -- for example on a pro basketball team -- where the pro athletes have their taxes go up and the billionaire owners are still in a position where they can avoid taxes,” Wyden said Thursday.

A separate proposal by the Biden administration to require banks to disclose accounts with $10,000 of aggregate deposits or outflows over a year to the Internal Revenue Service is likely off the table. The idea has been dropped from the latest framework, an administration official said.

Read More: Biden Framework Doesn’t Include Financial Data Reporting to IRS

Meantime, a SALT measure is still seen as likely for the final package.

“SALT will be in the endgame, yes,” House Ways and Means Chairman Richard Neal told reporters after a House Democratic caucus meeting with Biden at the Capitol on Thursday.

Read More: SALT-Break Expansion Seen Likely Despite Omission in Biden Plan

(Updates with state of play on items not mentioned, starting in second paragraph.)

To contact the reporter on this story:
Laura Davison in Washington at ldavison4@bloomberg.net

To contact the editors responsible for this story:
Joe Sobczyk at jsobczyk@bloomberg.net

Scott Lanman, Christopher Anstey

© 2021 Bloomberg L.P. All rights reserved. Used with permission.

To read more articles log in.

Learn more about a Bloomberg Tax subscription.