Tax Outlook Series: Biden’s Plan
June 25, 2024
Tax policy will be a key issue heading into 2025, and we are examining different election outcomes and their impact on taxes. This week, we take a deep dive into President Biden’s and Democrats’ various proposals on taxes. (Click here for the first article in a series analyzing election scenarios’ and their impact on tax policy.)
Tax Proposals: Biden’s proposal on taxes echo and expand some of his previous efforts, including those passed in the Inflation Reduction Act (IRA). Most of these provisions are dead on arrival with any Republican control, and many would be an uphill battle in an all-Democratic government.
- Limiting 1031 like-kind exchange treatment for real estate: The Biden Administration has consistently sought to reduce or remove the deferral provision, despite widespread Congressional support for maintaining the provisions. In April, CREFC joined 35 organizations in a letter to congressional leaders urging them to preserve Section 1031 like-kind exchange tax treatment for real estate. Click here for the letter.
- Raising the corporate tax rate to 28% and the corporate minimum tax to 21%: Biden looks to expand the 15% minimum corporate tax implemented in the IRA, including a global application of a 21% minimum.
- Eliminating the deduction for employee compensation exceeding $1 million.
- Quadrupling the stock buyback tax: Biden would raise the 1% tax on stock buybacks to 4%.
- Billionaire Tax: The proposal would implement a 25% minimum tax on individuals with more than $100 million in net assets. It is unclear if the tax would be a wealth tax or an income tax.
- Increase Medicare tax rate on $400,000+ incomes.
- Expanding Child Tax Credit: Reinstating and expanding the Child Tax Credit is a major priority for Democrats, and a provision is included in the bipartisan tax bill passed by the House this year. Some on the Left have criticized the bill for not going far enough.
- Strengthening the Earned Income Tax Credit: The White House says this provision would cut taxes by an average of $800 per year for 19 million working individuals or couples without children.
Even if Democrats sweep in November, narrow margins in both chambers would likely water down most of the proposals. Since Democrats have essentially ceded West Virginia’s senate seat to the GOP, they would have to successfully defend eight toss-up states and win Texas or Florida to maintain their 51-49 majority.
- And since many of the expiring provisions of the 2017 Trump tax plan focus on individual tax policy, some provisions transcend partisan lines.
- One such provision includes the limitation on the state and local tax (SALT) deductions, which has supporters and opponents in both parties. We expect the SALT discussion to be a key focal point in any election outcome, as the provision will expire after 2025.
- But some progressives have signaled that they would refuse to pass any tax bills without raising taxes on corporations or billionaires.
Contact David McCarthy (dmccarthy@crefc.org) with questions.