Tax Changes Moving Quickly in DC Today

Things are moving fast in DC this morning

The White House has released the “details” of the budget reconciliation framework deal that was announced this morning.?See two brief documents attached.?The following charts sum up the framework.?Note there are no increases in marginal tax rates, no changes to estate and gift taxes, no changes to the 199A pass-through deduction, and no changes to carried interest.?Since this is a framework things could still be fluid, but if these issues were to be included it’s likely they would be listed.???

?It is unclear whether all Democrats have bought into this framework and whether this framework is sufficient for Progressives to agree to proceed with a vote on the BIF.?As we have been predicting in our updates, the President needed to at least have a framework in hand before the G20 and COP 26 conferences for which he is leaving today to maintain credibility with his international counterparts on the OECD agreement and emissions goals.

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• The “corporate international reform” would include a 15% GILTI minimum rate to conform to the OECD Pillar 2 minimum rate (down from the House’s 16.6%).?FDII and BEAT are not specifically mentioned in the summary but could be included since the summary is very high level.?
• A 1% surcharge would apply to stock buybacks.
• The billionaire’s tax has been replaced with the House’s surtax on the wealthy, specifically a 5% tax on incomes above $10 million and an 8% tax on incomes above $25 million.?
• It will also make changes to the Net Investment Income Tax, or NIIT, presumably to apply the NIIT to non-corporate trade or business income as included in the House reconciliation package.
• Limiting business losses for the wealthy is probably making the $500,000 limitation on deductibility of losses permanent.
• Presumably the IRS investments do not include the inflow/outflow information reporting proposal but rather arise from increased enforcement on the wealthy.?This is a dialable estimate depending on the amount of additional funding to the IRS and the assumptions and modeling used.?
• Note that this chart does not include dynamic scoring as the pay-fors would be sufficient to cover the estimated approximately $2.0T cost.?

?Offsets – Estimates, Subject to Confirmation

$ billion 15% Corporate Minimum Tax on Large Corporations 325

Stock Buybacks Tax125

Corporate International Reform to Stop Rewarding Companies That Ship Jobs and Profits Overseas 350

AGI Surcharge on the Top 0.02% 230

Close Medicare Tax Loophole for Wealthy 250

Limit Business Losses for the Wealthy 170

IRS Investments to Close the Tax Gap 400

Prescription Drugs: Repeal Rebate Rule 145

Up to a Total of: 1995

?Policy

$ billion

Child Care and Preschool 400

Home Care 150

Child Tax & Earned Income Tax Credits 200

Clean Energy and Climate Investments 555

ACA Credits, Including in Uncovered States 130

Medicare Hearing 35

Housing 150

Higher Ed and Workforce 40

Equity & Other Investments 90

Total 1750

Immigration 100

summary provided by K&L Gates