Before heading to the G20 and Climate Summits with his international counterparts today, President Biden announced a deal on a budget reconciliation framework. It remains unclear whether all Democrats are on board and if it is sufficient to garner Progressives’ support. The framework document, a product of months and months of shuttle diplomacy, includes no increases in marginal tax rates, no changes to estate and gift taxes, no changes to the 199A pass-through deduction, and no changes to carried interest. Note: Because this is a framework things are still subject to change.
Following are some highlights:
· A 1% surcharge would apply to stock buybacks.
· The billionaire’s tax has been replaced with the House’s surtax on the wealthy, specifically a 5% tax on incomes above $10 million and an 8% tax on incomes above $25 million.
· It will also make changes to the Net Investment Income Tax, or NIIT, presumably to apply the NIIT to non-corporate trade or business income as included in the House reconciliation package.
· Limiting business losses for the wealthy is probably making the $500,000 limitation on deductibility of losses permanent.
· Presumably the IRS investments do not include the inflow/outflow information reporting proposal but rather arise from increased enforcement on the wealthy.
|Offsets – Estimates, Subject to Confirmation||$ billion|
|15% Corporate Minimum Tax on Large Corporations||325|
|Stock Buybacks Tax||125|
|Corporate International Reform to Stop Rewarding Companies That Ship Jobs and Profits Overseas||350|
|AGI Surcharge on the Top 0.02%||230|
|Close Medicare Tax Loophole for Wealthy||250|
|Limit Business Losses for the Wealthy||170|
|IRS Investments to Close the Tax Gap||400|
|Prescription Drugs: Repeal Rebate Rule||145|
|Up to a Total of:||1995|
|Child Care and Preschool||400|
|Child Tax & Earned Income Tax Credits||200|
|Clean Energy and Climate Investments||555|
|ACA Credits, Including in Uncovered States||130|
|Higher Ed and Workforce||40|
|Equity & Other Investments||90|
Finally, this budget framework is down from the original $3.5 trillion price tag. It includes priorities like funding for climate change mitigation measures, childcare and universal preschool paid for with new taxes, including one aimed at millionaires and billionaires, but it omits many Democratic priorities, like paid family leave, free community college and pharmaceutical cost controls.
We will keep you apprised of any new major developments.