New tax law proposals are a common occurrence when a new Administration is elected. This is particularly the case when a new administration is from a different political party. This was the case in 2017 with the extensive tax law changes enacted in the Tax Cuts and Jobs Act of 2017. We are again seeing new tax proposals from the new Administration..
In May, the Administration, as part of its 2022 proposed budget, included numerous proposed tax law changes under its American Families and American Jobs Plans. Below is a synopsis of some of these proposals:
American Families Plan
The proposed budget would make three changes to the taxation of high-income individuals:
Increasing the top marginal income tax rate for high earners from 37% to 39.6% for taxpayers with taxable income over $509,300 for married taxpayers filing jointly and over $452,700 for single filers;
Taxing capital gains of high-income individuals (with adjusted gross income over $1 million) at a 37% rate; and,
Imposing capital gain tax on property transferred by gift and on property owned at death; and rationalizing the net investment income and Self-Employment Contributions Act (SECA) taxes so that all passthrough business income of high-income individuals is subject to either the net investment income tax or SECA tax.
American Jobs Plan
Some of the corporate tax changes in the proposed budget include:
- Raising the corporate income tax rate to 28% from its current 21%;
- Revising the global minimum tax regime, disallowing deductions attributable to exempt income, and limiting inversions;
- Repealing the global intangible low-taxed income (GILTI) exemption for foreign oil and gas extraction income; Imposing a 15% minimum tax on book earnings of large corporations; and,
- Providing a 10% tax credit as an incentive for locating jobs and business activity in the United States and removing tax deductions for expenses incurred in connection with moving jobs overseas.
As noted above, these are proposals subject to legislative debate, revisions, and passage by the House and the Senate before enactment.