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Biden Proposed Budget, 2023


On March 9, 2023, the Biden Administration proposed a $6.8 trillion budget for fiscal year 2024, which includes tax increases of almost $5 trillion on high-income individuals and large corporations. Some of these tax proposals were previously included in President Biden’s 2021 Build Back Better plan.


However, the current budget proposal, including the tax increases, is unlikely to be approved by Congress in its current form, although it provides a starting point for negotiations. The budget proposal contains various major tax proposals for corporate and international tax, individual and pass-through business tax, and other tax proposals. These include increasing the tax rate for C corporations, revising the global minimum tax regime, imposing a new 25% minimum tax on total income, and increasing IRS funding, among others.


Proposed tax changes in the 2024 budget released by the Biden Administration on March 9, 2023:


Corporate and International Tax:


  • Increase C corporation tax rate from 21% to 28%

  • Revise global minimum tax regime and limit inversions

  • Increase GILTI rate from 10.5% to 14% (or 21% with proposed corporate income tax rate increase) and calculate tax on jurisdiction-by-jurisdiction basis

  • Repeal BEAT regime and replace it with an "undertaxed profits rule"

  • Repeal 37.5% deduction for FDII

  • Increase stock repurchase excise tax from 1% to 4%


Individual and Pass-Through Business Tax:


  • Increase top individual income tax rate from 37% to 39.6% for taxable income exceeding $400,000 ($450,000 for joint filers)

  • Increase net investment income tax and additional Medicare tax rate from 3.8% to 5% for income exceeding $400,000

  • Expand NIIT base to ensure all pass-through business income (not just investment income) of taxpayers with income exceeding $400,000 is subject to NIIT or self-employment tax

  • Tax capital gains at ordinary income tax rates for taxable income exceeding $1 million.

  • Impose a new 25% minimum tax on total income (including unrealized capital gains) for all taxpayers with wealth exceeding $100 million (assets minus liabilities)

  • Require mandatory distributions from retirement account balances exceeding $10 million by taxpayers with adjusted gross income exceeding $400,000 ($450,000 for joint filers)

  • Impose ordinary income tax on a service partner’s share of income from an “investment partnership” if their income (from all sources) exceeds $400,000

  • Repeal gain deferral for like-kind real property exchanges to the extent that the gain exceeds $500,000 per taxpayer ($1 million for married couples)


Other Tax Proposals:


  • Impose capital gains tax on donors who transfer appreciated property by gift or on death (with certain exclusions) for trusts and estates

  • Expand and make permanent child tax credit, expanded Earned Income Tax Credit for workers without children and certain health care premium tax credits, and create, extend, and expand various credits to support housing and urban development

  • Increase energy taxes, including the repeal of expensing for intangible drilling costs, repeal of percentage depletion for oil and gas wells, and imposition of a new 30% excise tax on electricity used for digital asset mining.

  • Apply the wash-sale rule (which disallows losses if the same or substantially identical stock or securities are purchased within 30 days before or after the sale) to digital assets, including virtual currencies.

  • Increase IRS funding by 15% to $14.1 billion in 2032 and 2033, including $642 million more for improving taxpayer services and $290 million for business systems modernization.


Disclosures:


This commentary is provided for general information purposes only and should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship.


The market commentary appearing above has been prepared by personnel of and for Evolve Wealth Advisors, LP. The information contained within the commentary is provided as general market commentary only and does not constitute any form of regulated financial advice, legal, tax, or other regulated financial service. It is not considered to be investment research or a research recommendation, as it does not constitute substantive research or analysis. Any charts or graphs do not reflect past or current recommendations by Evolve Wealth Advisors and should be considered an academic treatment of empirical data. Investors should consult their financial advisor when applying the assumptions of any chart or graph.


Evolve Wealth Advisors’ commentary is not directed to, or intended for distribution to or use by, any person or entity who is a resident or citizen of or located in any municipality, county, state, country or other jurisdiction where such distribution, publication, availability, or use would be contrary to any law or regulation, or which would subject Evolve Wealth Advisors to any registration or licensing requirement within such jurisdiction.


The foregoing market commentary does not purport to contain all the information that an interested party may desire or require to make an investment decision, and the information provided is not intended as a sufficient basis on which to make an investment decision. It is intended only to provide the observations and views of the author and for educational purposes only and should not be used to predict security prices or market levels. While it has been derived from sources believed to be reliable, Evolve Wealth Advisors does not represent or warrant its accuracy or completeness. It is not intended as a solicitation for a particular investment, and it may be changed at any time, without notice, by Evolve Wealth Advisors and its personnel. Evolve Wealth Advisors accepts no liability for losses arising from the use of its market commentary. Investors should seek investment, financial, and other advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that past performance does not guarantee future performance. No investment is guaranteed, and all carry some element of risk of loss, partial or complete.

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