Lawmakers Negotiating Taxes to Support $3.5T Budget Plan

By:
Chris Gaetano
Published Date:
Aug 30, 2021
1280px-Capitol-Senate

Although both chambers of Congress approved the $3.5 trillion spending plan that supports the administration's current priorities, the hard part is far from over, as lawmakers are now negotiating the blueprint's particulars, especially the taxes that will support the plan.

Chief among them, according to Business Insider, is a proposed tax increase on corporations that would raise the tax rate to 28 percent, from the current 21 percent level established by the previous administration (though still lower than the 35 percent rate previous to that.) Republicans and moderate Democrats would prefer something closer to 25 percent instead.

Beyond this, lawmakers are also debating changes to the the global intangible low-taxed income (GILTI) system. These changes would repeal the tax exemption for the first 10 percent return on foreign assets; calculate the GILTI minimum tax on a per-country basis rather than aggregated; increase the minimum tax to three quarters of the corporate tax rate, as opposed to the current one half (so, 21 percent); and disallow deductions for the offshoring of production.

There could also be changes to the base erosion and anti-abuse tax (BEAT). Democrats are proposing that all Section 38 general business credits would not reduce the regular tax liability for purposes of determining the base erosion minimum tax amount. There would also be a new bracket, with the specific rate yet to be determined. The higher bracket would apply to “base erosion income,” which is the amount of income added to taxable income under Section 59A(c)(1) to determine the modified taxable income. Regular taxable income, excluding base erosion income, would remain subject to the 10 percent rate in the BEAT equation. So, base erosion income plus regular taxable income would be equal to the current law modified taxable income. As with current law, the rates on base erosion income increase by 2.5 percentage points after 2025.

Business Inside quoted, Kyle Pomerleau, a tax expert at the conservative-leaning American Enterprise Institute, who said that the tax changes could raise $800 billion. That  would be enough to give everyone in the country two additional stimulus $1,400 checks similar to the ones authorized by recent pandemic-related legislation.

Fortune noted that, amid these and other proposed tax increases, there is another demand from moderate lawmakers to lift or remove the $10,000 cap on state and local tax deductions, which was imposed to pay for the Tax Cuts and Jobs Act. These legislators, many of whom are from New York and other states especially affected by the cap, said they will not support the measure without such an action  

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