President Biden released details of his $1.8 trillion American Families Plan. First, the tax cuts: Biden’s American Families Plan would extend the American Rescue Plan’s expanded health insurance premium tax credits; extend the ARP’s more generous Child Tax Credits through 2025 and make the CTC permanently fully refundable; permanently increase tax credits for child care and the expanded Earned Income Tax Credit for childless workers.
Next the revenue-raisers: Biden would increase the top tax rate on the wealthiest Americans to 39.6 percent and tax investment income earned by households making total income of $1 million annually at that top ordinary income rate. He’d also tax unrealized capital gains at death, close the carried interest loophole so that hedge fund partners will pay ordinary income rates; end deferral of taxation on property exchanges when gains exceed $500,000; permanently restrict large, excess business losses; apply Medicare taxes consistently on incomes over $400,000; and give IRS authority to regulate paid tax preparers. The White House says households making less than $400,000 will not pay higher taxes.
And what wouldn’t change: Biden left out three ideas he raised in the campaign: He’s not raising the estate tax; he’s not repealing the special tax breaks for pass-through businesses that were included in the TCJA; and he’s not reforming Social Security, a proposal that would have subjected wages in excess of $400,000 to the payroll tax. Oh, and he has not proposed any change to the Tax Cuts and Jobs Act’s $10,000 cap and on the state and local tax (SALT) deduction.
Quarterly or monthly CTC payments? TPC’s Elaine Maag looks at the benefits of each. The ARP requires IRS to make the payments on a regular basis instead of just once a year, but give it flexibility to decide how often. Elaine and her co-author Bill Congdon review the pros and cons of the different schedules. The conclusion: Either one likely is an improvement over an annual payment.
Think the inheritance tax is high in the US? The family of late Samsung Chairman Lee Kun-hee will pay nearly $10.8 billion in inheritance tax. The bill is one of the largest ever in any country. The family plans to pay in six installments over five years, starting this month.
A gas tax increase in New York State? Democratic state lawmakers are advocating for a state gas tax increase of 55 cents per gallon. The Climate and Community Investment Act aims to create new green jobs, invest in minority communities, and combat the climate crisis by supporting the transition to renewable energy sources. Republican lawmakers say they will oppose the gas tax hike because they say it is regressive. .
Tune in today for TPC’s Prescription. Today at noon join David Bradbury, head of the Tax Policy and Statistics Division of the Centre for Tax Policy and Administration at the Organisation for Economic Co-operation and Development (OECD). He’ll be talking with TPC’s Howard Gleckman about worldwide fiscal policy responses to the pandemic. Learn more and register here for the noontime online event.
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