Biden Administration Spotlights Tax Priorities in FY 2024 Budget Proposal

Although the White House released the Biden administration’s FY 2024 budget proposal on March 9th, 2023, Treasury’s accompanying Greenbook is where all the tax fun is. Within the Greenbook, Treasury details the administration’s new and recycled tax proposals, many of which we’ve seen in prior budgets and legislative attempts.

Generally, some of the new policy proposals include:

• Creation of a digital asset mining energy excise tax;
• Expanding the net investment income tax (NIIT) to applicable pass-through business income;
• Increasing to 5%, up from 3.8, the NIIT on all investment and business income for taxpayers with more than $400,000 in earnings, while also increasing to 5% the Medicare tax on wages and salaries;
• Creation of the Neighborhood Homes Credit (to support building/renovating affordable owner-occupied housing); and
• Modifying rules related to retirement plans to prevent excessive accumulations by high-income taxpayers in tax-favored retirement accounts.

Additionally, some key highlights of other and perhaps more familiar proposals include:

• Increasing the top individual income tax rate to 39.6%;
• Increasing the statutory corporate rate to 28%;
• Making permanent the expansions to the Earned Income Tax Credit for childless workers;
• Making permanent the New Markets Tax Credit (NMTC);
• Extending the expansion of the Child Tax Credit to certain children through 2025 and making the credit fully refundable;
• Repealing the deduction for “foreign-derived intangible income” (FDII);
• Taxing carried (profits) interest income as ordinary income;
• Repealing deferral of gain from like-kind exchanges completed in tax years beginning after December 31, 2023, when greater than $500,000;
• Repealing certain fossil fuel subsidies;
• Increasing the excise tax rate on repurchase of corporate stock to 4%;
• Imposing a 25% minimum tax on total income, generally inclusive of unrealized capital gains, for all taxpayers with wealth greater than $100 million; and
• Making permanent the excess business loss limitation, treating excess business losses carried forward from the prior year as current-year business losses instead of as NOL deductions beginning in 2024.

Notably, the president’s budget dances around the notion of continuing for those making less than $400,000 some of the tax provisions expiring in 2025 under the Tax Cuts and Jobs Act (TCJA) (P.L. 115-97) but provides no substantive details on such.