House Democrats Propose Slightly Less Ambitious Tax Plan Than First Outlined

By:
Chris Gaetano
Published Date:
Sep 13, 2021
1920px-United_States_Capitol_-_west_front

House Democrats have released initial details of their proposed tax plan to fund the White House's $3.5 trillion economic agenda, which calls for significant tax increases, though slightly lower than those first proposed by the Biden Administration

President Biden had initially called for a 28 percent corporate tax rate (compared to 21 percent now), and a 39.6 percent capital gains rate for top earners (as opposed to 20 percent now). According to Bloomberg, the new plan calls for a corporate tax rate of 26.5 percent and a capital gains tax rate of 25 percent.

The plan, as proposed, also lacks the administration's idea to end the stepped-up basis, which has generally allowed heirs to reduce their capital gains losses by resetting the market value of assets to their value on the date of the original owner’s death.

Further funding would come from other revised provisions. For instance, the Wall Street Journal noted that the plan also raises the minimum tax on corporations' foreign income from 10.5 percent to 16.6 percent, but this is still below the 21 percent the administration first sought. The plan would also reverse the doubling of the estate tax exemption that Congress created in 2017 sooner: after 2021, rather than in 2025, as originally structured. It would also limit several estate-planning techniques, including some uses of grantor trusts and asset transfers with discounted values. Further, said the Journal, high-income people with tax-preferred retirement accounts totaling $10 million or more would no longer be able to contribute to those accounts and would face sharply higher mandatory distributions once the account balances reached that level. The plan would also sharply limited the use of conservation easements. 

 
Bloomberg noted that there is no mention of removing or at the very least raising the $10,000 cap on state and local tax (SALT) deductions, which previously had been described as a hard requirement for legislators from New York, New Jersey and California for their support of the bill. Bloomberg said that these lawmakers still consider a SALT deal essential; considering the thin margins of control the party has, it is unknown how Democrats will get these legislators on their side. 

The House Ways and Means Committee intends to vote on the tax package this week. 

Click here to see more of the latest news from the NYSSCPA.