President Biden proposed a new version of Build Back Better. The scaled-back framework would increase spending and tax subsidies by $1.75 trillion for a wide range of social and clean energy programs. The expanded child credit would be extended for a year but full refundability would be made permanent. The Earned Income Tax Credit expansions also would be extended for only one year. The plan also includes about $2 trillion in offsets, nearly all tax increases on high-income households and corporations. It appears that liberals and moderates are on board, so far.
About those tax hikes. They include a surtax on AGI over $10 million, a 15 percent corporate minimum tax on book income, a 1 percent surtax on stock buybacks, and international tax changes that align with the agreement reached by member nations of the Organization for Economic Cooperation and Development. It also calls for funding for IRS enforcement. Excluded, so far: any modification to the cap on the federal state and local tax (SALT) deduction.
How would the surtax work? TPC’s Howard Gleckman explains. Unlike other efforts to tax the rich, this one focuses on annual adjusted gross income, not accumulated wealth. But it may be much easier to administer and would collect about $230 billion over 10 years, according to the White House.
House Liberals still blocking the infrastructure bill. Even though House leaders presented them with a draft Build Back Better bill, the progressives said they will not support a bipartisan infrastructure bill until remaining outstanding issues are resolved. Maybe next week.
The US economy grew by an annual rate of 2 percent in the third quarter. The Bureau of Economic Analysis numbers are far lower than the previous quarter’s growth of 6.7 percent. The main reason: The Delta variant of the coronavirus slowed spending. Adjusting for inflation, growth so far this year is approaching 6 percent, the fastest rate in almost 40 years.
Puerto Rican families are now eligible for the Child Tax Credit (CTC)—but they have to file. TPC’s Richard Auxier writes the American Rescue Plan permanently repealed two restrictions that prevented most Puerto Rican families from accessing the CTC. “But because so few parents on the island pay federal income tax or even typically file a Form 1040, policymakers and community organizations will have to work hard to help families get this critical benefit.” The poverty rate in Puerto Rico exceeds 40 percent.
House Ways & Means GILTI reform aligns with key OECD provision. TPC’s Thornton Matheson compares the global intangible low-tax income (GILTI) reform proposed by the House Ways and Means Committee with the global minimum tax recommended by the Organization for Economic Cooperation and Development and G-20 nations. The House committee proposal would raise roughly $100 billion more over 10 years than the OECD plan. Its effective tax rate on foreign-source income would meet the target for minimum taxes set by the OECD and G20.
Call for papers for the 2022 IRS/TPC Joint Conference on Tax Administration. It will take place next June 16. Topics may include measuring and influencing taxpayer compliance, estimating taxpayer compliance costs, complexity, administration, and understanding taxpayer behavior. Learn more here. Proposals for papers are due on December 1. For more information about, including previous conference programs and papers, visit the IRS website.
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