Biden Proposes $1.8 Trillion “American Families Plan” Funded by Tax Increases
President Biden on April 28 outlined a $1.8 trillion American Families Plan that would fund an expansion of government support for child care, education, paid family leave and other “human infrastructure” initiatives through new tax increases. [Full text of the President's prepared remarks and CNBC, April 29)
- The proposal is the third part of Biden’s Build Back Better campaign, which would total $6 trillion in federal spending and tax cuts over the next decade if fully implemented. This week’s proposal follows the $2.3 trillion American Jobs Plan in early April and the $1.9 trillion American Rescue Plan enacted in March. (Wall Street Journal, April 29)
- Biden proposes to pay for The American Families Plan with tax increases on upper-income taxpayers and new tax enforcement initiatives, including significantly higher tax rates on capital investment. Collectively, the Administration claims these changes would raise $1.5 trillion over 10 years. (American Families Plan Fact Sheet)
- Real Estate Roundtable President and CEO Jeffrey DeBoer, above, said, “President Biden’s American Jobs Plan and American Families Plan offer very credible initiatives to address some of our nation’s most pressing needs—a modernized infrastructure, a more comprehensive approach to climate-related matters, as well as increased investments in housing, education and child care.”
- DeBoer also warned, “As policymakers consider the options to raise this needed revenue, we strongly urge that the focus be on broad-based tax increases that do minimal damage to job creation, risk taking and entrepreneurial activity. Unfortunately, particularly when considered in total, many of the tax proposals accompanying the American Jobs Plan or American Families Plan would reduce economic activity, impede job growth, and diminish opportunities for startup businesses and those less advantaged. The current law in these areas may be in need of review and reform, but repealing these incentives is simply not wise.” (Full Roundtable statement)
Specific Tax Increases
- The tax proposals in the American Families Plan include increasing the top tax rate on ordinary income from 37 percent to 39.6 percent, which would impact single filers with income above about $453,000 and married couples with income above approximately $509,000, a White House official said. (The Hill, April 29)
- Raising the tax rate on capital gains and dividends from 20 percent to 39.6 percent for households making over $1 million. (Tax Foundation, April 23)
- Restricting gain deferred through like-kind exchanges to no more than $500,000 per-year. (Wall Street Journal, April 28)
- Stepped-up basis: Taxing unrealized gains in excess of $1 million ($2.5 million per couple) at death, but with an exception for family-owned businesses passed on to heirs who continue to run the business. (American Families Plan Fact Sheet)
- Reforming the current tax treatment of carried interest: (GlobeSt, April 29)
- Expanding the 3.8% Medicare tax on earnings and net investment income to apply to additional activities currently outside the scope of the tax.
- Permanently extending the 2017 Tax Cuts and Jobs Act (TCJA) provision, section 461(l), that restricts the deductibility of active pass-through business losses to $250,000 for an individual or $500,000 for a married couple.
- Notably absent from the American Families Plan are any proposals related to reinstating the deduction for state and local taxes (SALT).
- Several Senate Democrats have signaled they do not support all the tax increase proposals. Sen. Sen. Joe Manchin (D-WV), a pivotal centrist lawmaker, along with Sens. Mark Warner (D-VA) and Bob Menendez (D-NJ), members of the Senate Finance Committee, voiced concerns that higher capital gains rates could slow economic growth, according to the Wall Street Journal.
- Menendez commented on the proposed increase, “For me, it is what you’re doing, the totality of the package, and how does it affect the ability of growth to continue to take place. That’s how I’m judging it. Right now it seems like a rather high rate to me.”
President Biden plans to host his first meeting since taking office with House and Senate leaders from both parties on May 12, according to a White House official. (BGov, April 29)
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Biden Administration Requests Voluntary “Commitments” from CRE Companies to Help Tackle the Climate Crisis
As part of the roll-out for its American Jobs Plan to invest in the nation’s “physical” infrastructure assets, the Biden Administration is asking real estate companies to make voluntary “commitments” to help reduce the built environment’s carbon footprint. (Climate Commitment Fact Sheet)
- The White House seeks three categories of voluntary “commitments” from real estate companies. A fact sheet prepared by The Roundtable provides more details:
(1) EV Charging Stations: Commitments to install a significant number of EV charging infrastructure in parking lots, garages, gas stations, and other areas.
(2) Clean Power Purchases: Commitments to purchase clean power in amounts that “offset” or “credit” the electricity consumed by an entire or majority of a real estate portfolio.
(3) Data Sharing: Commitments for a real estate company to share data on building energy consumption with federal agencies and US-DOE’s national laboratories.
- Mark Chambers, Senior Director for Building Emissions with the White House Council on Environmental Quality (CEQ), outlined these commitments with The Real Estate Roundtable’s Board of Directors on April 20 timed with the Spring 2021 Roundtable meeting. (Roundtable Weekly, April 23).
White House Recognition
- Participating companies stepping up to the challenge will be recognized by the Biden Administration. A small number of commitments, deemed “significant” by the White House and reached within the next 7-10 days, may be showcased on May 17 with Cabinet-level participation at the virtual Better Buildings Summit sponsored by the U.S. Department of Energy.
- The Administration’s outreach to CRE is part of a multi-industry push to also enlist the manufacturing, technology, transportation, power generation, and utility sectors as “partners” in tackling the climate crisis. (Forbes, April 29; Reuters, Feb. 3)
- Over 400+ businesses and investors recently signed an open letter urging the Biden Administration to cut U.S. GHG emissions in half by 2030 (relative to a 2005 baseline).
Any real estate company interested in exploring a commitment and earning recognition from the White House should contact Mark Chambers directly at Mark.C.Chambers@ceq.eop.gov. The Roundtable can also facilitate connections to the Administration through Duane Desiderio, Senior VP for energy and infrastructure policy (firstname.lastname@example.org).
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Senate Hearings Focus on Clean Energy and Tax Policy, Climate Bank
Senate hearings this week indicate that clean energy financing and tax policies considered in the current Congress might significantly affect commercial real estate. (Tax Notes, April 29)
Senate Finance Focus
- Senate Finance Committee Chairman Ron Wyden (D-OR), photo above, opened an April 27 hearing by noting how President Biden’s goal of cutting carbon emissions in half by 2030 is driving clean energy policy. Wyden stated, "The reality is, a debate on energy and transportation is largely a debate on tax policy. That puts this committee in the driver’s seat when it comes to job-creating legislation that addresses head-on the existential challenge of the climate crisis."
- Sen Wyden also remarked about legislation he introduced last week – the Clean Energy for America Act, which would revamp tax incentives directed at buildings, electricity and transportation. Among other things, the bill would reform the 179D deduction for energy efficient commercial and multifamily buildings – with the value of the incentive increasing as more energy is conserved. (Text of the legislation, one-page summary of the bill and a section-by-section summary.)
- Committee Ranking Member Sen. Mike Crapo during his opening remarks noted draft legislation that he unveiled the day before with committee member Sheldon Whitehouse (D-RI) – the Energy Sector Innovation Credit (ESIC) Act. ESIC is an incentive that would “target tax credits for innovative clean energy technologies,” Crapo said. (SFC news release).
E-QUIP Accelerated Depreciation
- Separately, a broad coalition of environmental, manufacturing, and real estate groups led by The Roundtable supports the E-QUIP Act (H.R. 2346), which proposes “accelerated depreciation” for high-performance equipment installed in commercial and multifamily buildings. The coalition is urging policymakers to include this measure as part of any “green tax” package that may be folded into larger infrastructure spending legislation. (Roundtable Weekly, April 2)
- Roundtable President and CEO Jeffrey DeBoer emphasized an important distinction between the energy incentives affecting CRE. “All building owners are intensely focused on operations and technologies to reduce energy consumption. Yet the policy discussions in Washington frequently don’t reflect the reality of these efforts to make commercial real estate properties more sustainable. It is retrofitting the existing building stock, not new construction, where energy savings and policy incentives are most challenging.” DeBoer said.
- He added, “The 179D incentive fails to reflect the diverse vintage and tenant base in buildings. The E-QUIP incentive accommodates existing buildings by targeting the addition of high-performance, energy saving components. Combining the two incentives would make most sense.”
National Climate Bank
- The Senate Environment and Public Works Climate Subcommittee on April 27 held a “Legislative Hearing on S.283, National Climate Bank Act” focused on how a national climate bank, also known as an “energy accelerator,” would invest in renewable energy technology.
- Sen. Chris Van Hollen (D-MD), photo above, co-author of S. 283 with Subcommittee Chairman Sen. Ed Markey (D-MA), testified at the hearing, “… we need a National Clean Energy Accelerator … so we can turbocharge private investment, fortify our energy grid, and create millions of clean energy jobs – including in those communities where fossil fuel plants have closed.”
- Van Hollen’s legislation is supported conceptually by President Biden’s American Jobs Plan, which recommends a $27 billion “accelerator” financing platform to mobilize private investment into building retrofits and other clean energy projects.
- White House National Economic Council Director Brian Deese recently discussed the creation of a climate bank in an interview with Roundtable President and CEO, Jeffrey DeBoer for The Roundtable's April 20 Spring Meeting. (Roundtable Weekly, April 23).
Additionally, the White House on April 27 announced policy actions to advance the expansion and modernization of the energy grid. National Climate Advisor Gina McCarthy noted, "After the Texas transmission debacle this winter, no one can doubt the need to invest in our electric grid. The steps that the Departments of Energy and Transportation are taking today, when combined with the grid investments outlined in the American Jobs Plan, will turbocharge the building of major new electricity transmission lines that will generate new jobs and power our economy for years to come."
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