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Treasury Secretary Testifies About Proposed Budget; Tax Pros Plan for The Year Ahead

By:
S.J. Steinhardt
Published Date:
Mar 22, 2024

iStock-836454122 Congress Capitol Washington DC House Senate

U.S. Secretary of the Treasury Janet Yellen appeared before the U.S. Senate Committee on Finance on March 21 to discuss the Biden Administration’s budget and tax proposals, and now tax experts are trying to forecast what might happen after the presidential election, Accounting Today reported.

The president’s $7.3 trillion budget for the next fiscal year proposes new spending on social programs and higher taxes on high earners and corporations. Yellen testified about the  administration's revenue proposals in its so-called Green Book, as well as plans for provisions of the Tax Cuts and Jobs Act (TCJA) of 2017 that are due to expire next year.

"The President's budget proposes additional investments to lower costs for workers and families and strengthen our economy while reducing the deficit," Yellen said in her opening statement. "It proposes making health care more affordable for millions of Americans by making permanent the expansion of tax credits for health insurance premiums enacted in the American Rescue Plan and extended in the Inflation Reduction Act. And the budget includes expanding the Earned Income Tax Credit, Child Tax Credit and Low-Income Housing Tax Credit—proposals which would contribute to lowering child poverty and giving working families more breathing room in their household budgets. We can make these investments while reducing the deficit by $3 trillion over a decade through a combination of smart savings and tax proposals."

The proposed budget is “filled with familiar partisan tax-and-spend proposals, doubling down on an agenda that was rejected even when Democrats had majorities in the Senate and House, said Sen. Mike Crapo (R-Idaho), the committee’s ranking member, in his opening statement. “The president proposes nearly $5 trillion in new and increased taxes. Tax increases of that magnitude will affect all Americans through lower paychecks and higher household expenses.”

Committee chairman Ron Wyden, (D-Ore.) urged Republicans on the committee to pass the tax extenders legislation that has languished.

"It has now been seven weeks since 357 members of the House voted to pass my bill with [Rep. Jason Smith (R-Mo.), chair of the House Ways and Means Committee] that expands the child tax credit and restores R&D incentives,” he said in a statement.

Yellen urged Congress to enable the United States to join the Organization for Economic Cooperation and Development's global minimum corporate tax agreement, noting that it's currently being implemented in jurisdictions around the world.

Crapo, Smith and other Republican lawmakers oppose joining the agreement. At the hearing, Crapo told Yellen that the Joint Committee on Taxation estimated that if both the rest of the world and United States enact the OECD rules designed to ensure that large multinational enterprises pay a minimum level of tax on the income arising in each jurisdiction where they operate, “the U.S would still lose over $50 billion.”

“The corporate tax increase would be significant because the average global corporate rate is within a percentage or so of where we are right now," said Edward Renn, a partner in the private client and tax team at law firm Withers, in an interview with Accounting Today. "That would impact businesses in a big way on profitability."

There is disagreement among tax experts about whether the United States should allow the OECD to set tax policy, Accounting Today reported.

"They're looking at what's going on with the OECD and its tax regime for global tax, and I think they're trying to come up with something that's really approximate to what the OECD is trying to accomplish," said Christopher McLoon of law firm Cozen O'Connor  in an interview with Accounting Today. "There's definitely a legitimate policy goal. I think the contra argument to that is that we don't share their goal. We're the United States. We want our own thing. We don't want to be guided by what the OECD does." 

In general, "[t]he budget is a wish list," said McLoon. "There's so much of this that, at least under present conditions, absolutely will not be law."