President Joe Biden will propose a large-scale tax increase and give billions more to the IRS to make sure rich individuals and large corporations are paying all they owe, according to a person familiar with his proposal.
The plan will include a top individual tax rate of 39.6% for those making at least $400,000 and will end an inheritance tax break on capital gains known as “step-up in basis,” the person said. The proposal will include $80 billion to boost the Internal Revenue Service’s audit capabilities over the next decade for wealthy individuals and corporations, a change that could generate $700 billion in revenue, according to the person.
The measures will be key elements to offset the cost of Biden’s “American Families Plan” that he’s set to unveil in a speech to Congress on Wednesday. The plan, estimated to cost about $1.8 trillion, is expected to include funding for paid leave, childcare and education, funded through tax increases on the rich.
Higher income tax rates for top earners, along with a 39.6% capital gains rate for those earning $1 million or more, mean that many wealthy taxpayers will see a significant increase in the levies they owe annually and when they sell major investments, such as stocks or businesses.
Repealing the step-up in basis provision would end a long-standing tax break that wipes away the capital gains on an asset when it is inherited, meaning that much of the appreciation on securities, properties and small businesses goes untaxed when the original owner dies.
Spending billions more on audit is intended to reverse a multi-year trend of falling audit rates at the IRS. Commissioner Chuck Rettig told a congressional panel this month that as much as $1 trillion in taxes may go uncollected each year. He said the agency has lost 17,000 enforcement personnel since 2010. Democrats in Congress have been proposing ways to increase audit levels by adding to the agency’s enforcement workforce and mandating higher examination rates of top earners.
A pot of $80 billion over a decade specifically for IRS enforcement, which averages to $8 billion in additional funding per year, would be a significant increase to the IRS, which has an annual budget for the entire agency of about $11.9 billion for fiscal year 2021.
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
RECOMMENDED FOR YOU