President Biden released Thursday a framework to help guide the drafting of legislative language for the Build Back Better bill. What once contained $3.5 trillion in spending, the BBB now has been negotiated down to about $1.850 trillion dollars.
The tax provisions included in the BBB framework include:
Corporate minimum tax and stock buyback surcharge. The Build Back Better framework will impose a 15% minimum tax on the corporate profits that large corporations-those with over $1 billion in profits-report to shareholders. The framework also includes a 1% surcharge on corporate stock buybacks.
OECD minimum tax. 136 countries, as part of the Organization for Economic Co-operation and Development (OECD), recently agreed on a 15% global corporate minimum tax. Consistent with that agreement, the framework would adopt a 15% country-by-country minimum tax on foreign profits of U.S. corporations.
Millionaire income tax surcharge. The Build Back Better framework includes a new surtax on the income of millionaires. It would apply a 5% rate above income of $10 million, and an additional 3% percent surtax on income above $25 million. The framework will also close the loopholes that allows some taxpayers to avoid paying the 3.8% Medicare tax on their earnings.
Investment in the IRS to increase audits of high-net-worth individuals. The framework will invest in the IRS: hiring enforcement agents who are trained to pursue wealthy evaders; modernizing outdated IRS technology; and investing in taxpayer service. The framework emphasizes that additional enforcement resources will be focused on pursuing those with the highest incomes; not Americans with income less than $400,000.
Limit business losses for the wealthy. The framework mentions this as one of the offsets to spending but does not provide any details. This could be referring to, possibly, making permanent the active pass-through loss limitation enacted in the 2017 Tax Cuts and Jobs Act (TCJA).
The U.S. House of Representatives followed by releasing a revised text of the Build Back Better bill to reflect the framework.
While not an exhaustive review, the revised bill eliminates some things, keeps some things the same, and adds some new provisions:
What’s gone. The revised bill eliminates the paid family and medical leave provisions that were in an earlier version of the bill. The revised bill also drops various retirement provisions, such as a credit for certain small employer automatic retirement arrangements, as well as provisions related to certain tax-exempt bonds.
What remains. But it leaves in an extensive series of credits for renewable energy and carbon reduction, as well as the extension and modification of the child tax credit and the earned income tax credit.
What’s new. Instead of an increase in the corporate income tax rate, there is a 15% corporate alternative minimum tax. There is also a 1% surcharge on corporate stock buybacks; a surcharge on high-net-worth individuals; and a limit on excess business losses.
The House has not yet voted on the Senate-approved $1 trillion infrastructure bill.