September 10, 2021
In order to pay for $3.5 trillion in new social spending and tax cuts, the Biden administration and congressional Democrats have proposed several changes to the tax code that would raise revenue to cover the cost. President Biden has said the new spending will be paid for, and many moderate Democrats have expressed their desire to avoid deficit spending (though the FY22 budget resolution allows for an increase to the deficit of $1.7 trillion over ten years). Some of the key proposed changes in the House and Senate include: increasing the corporate tax rate; increasing some capital gains taxes and eliminating the step up in-basis; partnership tax rule changes, including possible changes to carried interest allocations; SALT deductions (as a revenue hit); reforming international tax provisions created in the 2017 tax law; and the potential enactment of retroactive taxes.
Currently, Congressional leadership, along with Senate Finance Committee and House Ways and Means Committee chairs and members, are rifting over the size and details over plans to pay for the $3.5 trillion economic agenda. Senate Finance Committee Chairman Ron Wyden (D-OR) said, “we’re committed to raising the revenue needed to pay for critical priorities for American families.” While House Ways and Means Committee Chairman Richard Neal (D-MA) has less forthcoming about what the House tax package will look like. This reflects House leadership’s challenge to round up enough votes in the House for passage. Both Chairs are negotiating differences and it is expected that the revenue committees to release their proposed revenue provisions in the next few days. In the meantime, here are some key issues to track. Our team will continue to monitor proposed provisions and update accordingly.