• Home
  • Breaking News
  • Privacy Policy
  • Email Whitelisting
No Result
View All Result
Money Profit News
No Result
View All Result
Home Breaking News

Where the Money to Pay for Biden’s Budget Bill Will Come From

by
November 29, 2021
in Breaking News
0
0
SHARES
0
VIEWS
Share on FacebookShare on Twitter

Illustration by Chris Gash

Higher taxes are on the way for the very wealthy, and corporations. But when these changes begin, and what they’ll involve, remain unsettled as lawmakers debate how to pay for President Joe Biden’s $1.8 trillion budget bill.

Related Posts

Goldman sees debt limit fight possibly hitting stocks this summer

WHO says Covid remains a global emergency but pandemic could near its end in 2023

How analysts are playing gig economy stocks ahead of earnings

If you want to be really rich, use these 3 Warren Buffett investing techniques that no one talks about

The House passed its version of the expansive social spending and climate plan on Nov. 19, despite a report from the Congressional Budget Office that the bill would cost closer to $2.4 trillion and increase the federal budget deficit by $160 billion over 10 years.

The CBO analysis, however, didn’t include revenue from a proposed provision to beef up enforcement at the Internal Revenue Service. That, Democrats estimate—along with $1.5 trillion raised through tax increases—would pay for the bill’s broad reach.

Next, the bill moves to the Senate, where it is all but certain that legislative wrangling will continue and changes will be made. Support from all Democrats will be required for the bill to pass in the 50-50 Senate, where all Republicans are expected to vote against it. In the event of a tie, Vice President Kamala Harris would cast a vote, presumably for a Democratic win.

Read All the Guide to Wealth

The Senate may still vote on the bill prior to year end, but a full legislative plate could mean postponing a vote until early next year, says Garrett Watson, a senior policy analyst at the Tax Foundation.

Perhaps the biggest sticking point in the Senate is the House proposal to raise the $10,000 limitation on state and local tax deductions. The so-called SALT cap was imposed by the Tax Cuts and Jobs Act in 2018. The House bill would allow up to $80,000 in SALT deductions beginning this year—2021—through 2031, at which point it would fall back to $10,000.

While lawmakers from high-tax states such as New York and New Jersey say they won’t support a bill that doesn’t raise the SALT cap, a bump to $80,000 would cut taxes almost exclusively for the wealthiest taxpayers and provide no relief to most middle-income folks, according to the Tax Policy Center.

Advisor Newsletter

Advisor Daily

A collection of our top stories from the day, delivered every evening. Stay on top of the latest advisor news, community commentary, and opinion from industry leaders.

Under a $80,000 cap, 1.6% of households with income of $54,000 to $96,000 would receive an average benefit of $20 on their 2021 tax returns, while more than three-quarters of households in the top quintile of earners would benefit with an average $2,040 tax savings, according to the Tax Policy Center.

While these issues continue to get hashed out, here is a look at provisions likely to remain largely intact—though possibly with some modifications—if the bill passes in the Senate.

A surcharge on wealthy taxpayers and trusts

After original proposals to raise tax rates on ordinary income and capital gains were sunk by centrist Democrats, a compromise has gelled for a 5% surcharge on modified adjusted gross income of over $10 million, and an additional 3% surcharge—for a total of 8%—on income of over $25 million. AGI includes wages, commissions, capital gains and dividends, and retirement-plan distributions, among other income.

The surtax would boost the effective top tax rate from 37% to 48.8% on ordinary income when the 3.8% Medicare tax, and 20% to 31.8% on capital-gains tax, is included.

For nongrantor trusts, the 5% would apply to income of more than $200,000 and an additional 3% to income of more than $500,000.

Apply the Medicare tax to pass-through income

Most businesses are not subject to corporate income tax: Instead, they are structured as pass-through entities—such as sole proprietorships, partnerships, limited liability companies, and S-Corps—which means their owners include their share of business profits on their personal returns and are taxed at their personal income tax rate. Owners of pass-through entities do not currently pay the 3.8% Medicare tax. But a provision in the bill would levy the tax on active income of more than $400,000. Active income includes salaries. Passive income, which is investment income, would not be subject to the tax.

Limit business-loss deductions

Currently, losses from pass-through businesses can be carried forward into future years indefinitely; the new law would limit losses to a one-year carry forward.

Tighten rules for large IRAs

Individuals with aggregated IRA assets of more than $10 million would have to begin taking required minimum contributions—regardless of their age—beginning in 2029. Currently, distributions are required after IRA owners turn 72, no matter the account size.

Rules for Roth IRA conversions would also change. Starting in 2032, singles with income of more than $400,000 a year and couples earning more than $450,000 would be prohibited from converting assets from an IRA to a Roth IRA.

Set a corporate-tax floor

A 15% minimum tax would be levied on corporations earning more than $1 billion in annual profits. Some 230 businesses would be affected by this provision, according to the Tax Foundation.

Tax foreign profits

While there is support among lawmakers for taxing foreign profits, it is unclear how a provision may shape up. The House bill proposes a new 15% tax on foreign profits, separate from the proposed 15% minimum corporate tax, but senators have been crafting their own provision, says Watson. “This will be an interesting area to watch.”

Apply a surcharge to stock buybacks

Any company that buys back its own stocks would face a 1% transactional charge.

Bulk up IRS muscle

Funding to strengthen IRS enforcement capabilities and crack down on tax dodgers would aim to close an estimated $400 billion tax gap, the difference between the amount owed and collected each year.

Email: editors@barrons.com

Next Post

Biden says he doesn't expect more travel restrictions or lockdowns as omicron Covid variant spreads

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

email

Get the daily email about stock.

Please Enter Your Email Address:

By opting in you agree to our Privacy Policy. You also agree to receive emails from us and our affiliates. Remember that you can opt-out any time, we hate spam too!

Popular Posts

Breaking News

Goldman sees debt limit fight possibly hitting stocks this summer

by
January 30, 2023
0

The actions of the Federal Reserve have been driving markets for the better part of the year, but investors may...

Read more

Goldman sees debt limit fight possibly hitting stocks this summer

How analysts are playing gig economy stocks ahead of earnings

WHO says Covid remains a global emergency but pandemic could near its end in 2023

If you want to be really rich, use these 3 Warren Buffett investing techniques that no one talks about

I’m 49 years old and have nothing saved for retirement — what should I do? Don’t panic. Here are 3 of the easiest ways you can catch up (and fast)

Genius Brands stock soars after plans to spinoff $37 million Entrepreneur Resorts subsidiary

Load More

All rights reserved by www.moneyprofitnews.com

  • Home
  • Breaking News
  • Privacy Policy
  • Email Whitelisting
No Result
View All Result
  • Email Whitelisting
  • Home
  • Privacy Policy

moneyprofitnews