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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