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.
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