TAX TAKE: The Proposed Biden Tax Increases Will Be Tempered Through the Legislative Process

Tax Alert
05.10.2021

Although further details will be revealed in the pending Treasury Department "Greenbook" (which now appears targeted for release around Memorial Day), key potential tax increases put forth by the Biden Administration are now known through the release of the American Jobs Plan and the American Families Act. The scope and magnitude of these proposals is daunting: a significantly higher corporate tax rate, a new minimum tax on global book income, substantial changes to the international tax regime, and individual tax increases (including nearly doubling the top capital gains rate). It is important to note that these proposals are an aspirational list representing a worst-case scenario, and that they are unlikely to be enacted "as is" on either an individual or collective basis. Instead, these proposals are certain to be tempered as they are considered in the legislative process for a variety of practical and political reasons.

As an initial matter, these proposals purport to fully offset over $4 trillion in spending for traditional and "social" infrastructure investment. Congress will need to decide the scope of spending that it is willing to consider and, of that scope, how much it will finance through deficit spending and how much it will finance through tax increases. Regardless of whether legislation ultimately moves with bipartisan support (which seems unlikely) or through budget reconciliation, it is likely that the amount of spending will be reduced and that a significant portion of that reduced spending amount will be financed by an increase in the deficit, which could ultimately result in a reduction in the amount of tax increases needed. This reduced need for tax revenue will result in some proposals being disregarded completely (particularly those of a complex nature given the accelerated time frame for consideration of the legislation), whereas others will be pared down to gain sufficient political support (for example, a smaller increase to the corporate tax rate). While even these "tempered" tax increases are likely to be significant, the practical and political realities associated with moving such a massive piece of legislation through the process and getting the required Congressional votes will at least modulate what was originally proposed by the Biden Administration, leaving taxpayers with more modest changes to the existing system. #TaxTake

Upcoming Speaking Engagements and Events

Jorge and Loren will speak at the ABA Virtual 2021 May Tax Meeting on May 12. Jorge will present, Where, Oh Where Could My Refund Be? Loren will speak on the Overlay of Potential International Tax Reform and OECD Pillars I and II panel.

On May 25, Loren and Jorge will present Current Tax Issues Impacting the Pharmaceutical Industry, a Miller & Chevalier virtual roundtable discussion.

In The News

In Washington Internet Daily, Loren discussed the role of digital services taxes (DSTs) in negotiations around international tax harmonization. Loren said the U.S. proposal that countries drop such levies is "a matter of everybody dropping their weapons at the same time…nobody wants to go first."

World Trade Online reported comments made by Loren during a Washington International Trade Association webinar regarding DSTs. Loren said that ensuring other countries withdraw DSTs "can't just be a matter of trust" and will require "real procedures around what that will look like."


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