March 28, 2022
What to expect in Washington (March 28)
President Biden's FY2023 budget will be released today, March 28, and the White House announced in a weekend fact sheet that it will include a "billionaire's tax," applicable to those worth over $100 million, of "a minimum of 20 percent on all of their income, including unrealized investment income that currently is untaxed." Over half of the revenue is intended to come from households worth more than $1 billion. The proposal, which allows for spreading initial top-up payments on unrealized income over nine years, and then five years for top-up payments on new income going forward, would raise about $360 billion over 10 years, according to a fact sheet.
The President did not include a wealth tax in the previous budget nor during the presidential campaign but did try to target untaxed wealth through changes to stepped up basis, which didn't pick up sufficient political traction. Treasury Secretary Janet Yellen said in a February 2021 interview, "A wealth tax has been discussed but it is not something that President Biden has come out in favor of. I think it's something that has very difficult implementation problems."
Senate Finance Committee Chairman Ron Wyden (D-OR) proposed a "billionaire's tax" — which would have required a one-time tax on the current value of tradable assets like stocks and bonds over when they were purchased, payable over five years, then an annual mark-to-market tax on gains — to add to the Build Back Better Act in October amid opposition to rate increases, but it too failed to gain necessary political support. On the differing approaches between the two proposals, Chairman Wyden was quoted in the Wall Street Journal as saying, "While there are differences between the president's proposal and the Billionaires Income Tax, we're rowing in the same direction." Others, including Senator Elizabeth Warren (D-MA), have proposed an annual wealth tax. The House-passed BBBA included a surcharge on high income individuals, estates, and trusts (initial surtax on AGI of 5% over $10 million and additional surtax of 3% on AGI over $25 million).
"Under the Biden plan, if assets declined in value, the future stream of payments would be adjusted downward. Value increases would lead to a new, larger stream of tax payments. Asset sales could also lead to adjustments in the required minimum-tax payments," the WSJ story said. "The policy aim is effectively partial prepayment of taxes that would ultimately be owed at sale, death or gift, with a minimum average 20% tax rate over the long term."
Senator Joe Manchin (D-WV) has recently expressed a rekindled interest in an energy-focused package, after previously saying he could back a bill that splits revenue, including from tax changes, between deficit reduction and spending on climate initiatives. The President's Budget reportedly won't link revenue and spending proposals in order to avoid upsetting any blossoming negotiations on a reconciliation bill, which Senator Manchin has suggested would need to be voted on before the August congressional recess.
Bloomberg reported that the FY2023 Budget will include a "deficit-neutral reserve fund," and "Biden's budget tables won't include the prices of proposals such as universal free pre-school, an expanded Child Tax Credit, and funding to combat climate change, and also won't assume deficit reductions from policies such as prescription-drug reforms or tax increases on corporations and wealthy Americans. The document will simply treat the agenda — which Biden has pledged would be fully paid for — as being deficit-neutral."
The Budget will also prescribe significant deficit reduction, possibly to appeal to the sentiment of Senator Manchin in prioritizing that equally in any spending proposal. The Associated Press reported that the plan "proposes to cut projected budget deficits by more than $1 trillion over the next decade … the lower deficits also reflect the economy's resurgence as the United States emerges from the pandemic. It's a sign that the government's balance sheet will improve after a historic burst of spending to combat the coronavirus."
Customary post-Budget release tax and health hearings haven't been set at Ways & Means and Finance and may not be for some time. Both panels are holding hearings on the Administration's trade agenda this week. The House Ways & Means Committee will hold a hearing on the "Biden Administration's 2022 Trade Policy Agenda" on Wednesday, March 30, 2022 (at 10:00 a.m.), and the Senate Finance Committee will hold a similar trade hearing on Thursday, March 31 (at 10:00 a.m.).
A Senate Foreign Relations Committee vote on a tax treaty between the US and Chile is set for March 29.
Senate Majority Leader Chuck Schumer (D-NY) set up two votes for this evening, March 28, to complete the process of amending the America COMPETES Act (H.R. 4521) with the text of the Senate-passed USICA (S. 1260) so the two chambers can go to conference and resolve differences between the bills.
Returning from a one-week recess, the House is expected to consider a bipartisan "SECURE 2.0" retirement bill with committee-passed provisions from Ways & Means and Education & Labor. Text was posted on Friday.
The Senate HELP Committee will hold a hearing, "Rise and Shine: Improving Retirement and Enhancing Savings," on Tuesday, March 29 (at 10:00 a.m.).
Friday, April 1 (12:00 p.m.), is the EY Webcast, "Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments." Register.