TAX TAKE: Congress to Revenue Raisers: One Way or Another, I'm Gonna Find Ya
As negotiations continue regarding the contours of the Build Back Better Act reconciliation package, Senator Kyrsten Sinema (D-AZ), has indicated that she opposes the use of tax rate increases (i.e., individual, capital gains/dividends, and corporate rate increases) to fund the package's signature "social infrastructure" provisions. Given the importance of her vote in a 50/50 Senate, the Administration and Congressional Democrats are now scrambling to craft alternative "non-rate" revenue raisers. In light of the fact that the proposed rate increases served as the major funding mechanism in the House Committee on Ways and Means-passed package (the proposed increase in the corporate rate to 26.5 percent alone raises $540B over the 10-year budget window), it will be a difficult task for policymakers to replace such a significant amount of revenue – especially under a compressed end-of-year schedule. Senator Sinema has indicated a receptivity to revenue raising provisions in four broad categories — "international, domestic corporate, high net worth individuals, and tax enforcement" – but there is no further detail about specific provisions that are under consideration.
As for potential alternative "non-rate" revenue raisers, it is important for stakeholders to assess recent proposals that were generally considered to be on the backburner, but now may receive significant attention as Congress looks to put together a compromise package:
- Wyden Proposals: Senate Finance Committee Chairman Ron Wyden (D-OR) had proposed a series of revenue raisers that were not adopted in the House Committee on Ways and Means-passed package, including a stock buyback excise tax and a partnership reform package, as well as proposals addressing carried interest, derivates and international taxation. Senator Wyden also released a "mark to market" white paper in 2019 that could serve as the basis for a legislative proposal.
- The Greenbook: Although a number of the proposals from the Administration's Greenbook were included in the Ways and Means reconciliation package, there are additional proposals that could attract greater attention given the need for alternative revenue sources. In recent days, the Greenbook's proposed 15 percent minimum tax on book income has garnered renewed interest.
- Bank Account Information Reporting: Secretary Yellen recently endorsed a revised bank account information reporting proposal released by Senator Wyden and Senator Elizabeth Warren (D-MA) that would impact the financial services sector.
These proposals would significantly change major portions of the tax code while adding significant complexity. Further, it's unclear whether these proposals would raise an equivalent amount of revenue to fund the reconciliation package. Ultimately, some combination of reduced rate increases and new, "non-rate" revenue raisers may be employed. Now more than ever, everything is on the table and tax policy observers should be concerned about a process that has become even more revenue-driven than it was just a few days ago, particularly one that is likely to be conducted on an expedited basis. #TaxTake
Upcoming Speaking Engagements and Events
Marc will speak at the 56th Annual Southern Federal Virtual Tax Institute on a panel titled, "The 2021 Legislative Landscape: Evaluating Actual and Potential Changes," on October 25.
On November 8, Loren will speak on the tax policy panel at the 32nd Annual Philadelphia Tax Conference.
Loren will present, "Pending Regulatory Challenges to Select International Provisions of the Tax Cuts and Jobs Act," at the 67th Annual William & Mary Tax Conference on November 12.
On November 30, Loren will speak on the North America panel at IFA's 2021 virtual event, "The Global Tax Agreement: The Two-Pillar Solution."
In the News
Jorge commented in Tax Notes on the uncertainty surrounding the Biden Administration's proposal to expand financial reporting.
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