President Biden Proposes Fiscal Year 2024 Budget

President Biden Proposes Fiscal Year 2024 Budget

President Biden has released his Fiscal Year (FY) 2024 Budget to Congress, with a proposal to raise taxes on corporations and individuals with income over $400,000, as part of a plan to reduce the federal budget deficit by $2.8 trillion over 10 years. Below are key business and individual provisions that are outlined in the Budget.

Corporate and International Tax Proposals

Proposed reforms to corporate and U.S. international tax rules include:

  • Increasing the corporate income tax rate from 21% to 28%, projected to raise $1.3 trillion over 10 years
  • Increasing the global intangible low-taxed income (GILTI) tax rate from 10.5% to 21% and calculating the tax on a jurisdiction-by-jurisdiction basis, projected to raise $493 billion over 10 years with other related reforms
  • Repealing Base Erosion and Anti-Abuse Tax (BEAT) and adopting an undertaxed profit rule that is estimated to raise $549 billion over 10 years
  • Repealing the deduction for foreign-derived intangible income (FDII) and providing additional support to research and experimentation
  • Increasing taxes on foreign fossil fuel income, including changing to the tax rule for dual capacity taxpayers, estimated to raise $66.1 billion over 10 years
  • Quadrupling the corporate stock buyback tax implemented in the Inflation Reduction Act from 1% to 4% to address the continued tax advantage for buybacks
  • Correct drafting errors in the taxation of insurance companies under the 2017 Act

Individual and Pass-Through Business Tax Proposals

Individual tax proposals that are in the Budget include:

  • Increasing the top statutory tax rate on individual income to 39.6% for single filers earning over $400,000 and joint filers earning over $450,000, projected to raise $235.2 billion over 10 years
  • Implementing a 25% minimum tax on all wealth over $100 million, this tax would only apply to 0.01% of Americans, and would apply on total income including unemployed capital gain income
  • Expanding the base of the net investment income tax (NIIT) to apply to active pass-through business income above $400,000 and increase the NIIT and health insurance tax rates from 3.8% to 5% above $400,000
  • Restricting contributions to IRAs for taxpayers with incomes above $400,000
  • Making the pass-through business loss limitation permanent
  • Tax carried interest as ordinary income

Capital Gains, Estate, Gift Tax and IRS Proposals

Additional Budget proposals include:

  • Repealing like-kind exchanges for deferred gain worth over $500,000 for single taxpayers and $1 million for joint taxpayers
  • Taxing capital gains at ordinary income tax rates for taxpayers with income over $1 million
  • Reforming cryptocurrency tax rules
  • Modifying estate and gift tax rules, including valuations and trusts
  • Increasing tax compliance and enforcement
  • Treating transfers of appreciated property by gift or at death as a realization event, donor or deceased owner will realize a capital gain

Expanded Tax Credits and Other Important Provisions

The proposed Budget is calling to expand and extend the following:

  • Restoring the full child tax credit that was enacted in the American Rescue Plan Act of 2021 (ARPA). The Budget would increase the credit from $2,000 to $3,000 for children six years and older. The credit for children under six would remain at $3,600 per child. The Budget would also make the credit fully refundable.
  • Permanently extending the ARPA enhanced premium tax credits after they are set to expire in 2026
  • Permanently expanding the earned income tax credit for workers without qualifying children
  • Expanding the low-income housing tax credit and creating a tax credit for rehabilitating homes in high-poverty neighborhoods
  • Making the new markets tax credit permanent and expanding various tax provisions for work, education and childcare

For more information on the proposed Budget, read the White House factsheet or the Department of Treasury’s General Explanations of the Administration’s Budget proposal. Please contact your BSSF advisor if you have any questions.

Posted In: Tax | Insights

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