March 10, 2023
US President Biden releases FY2024 Budget
United States (US) President Joe Biden's fiscal year (FY) 2024 Budget released 9 March calls for US$3 trillion1 in deficit reduction including through tax increases on corporations and wealthy individuals, "while ensuring that no one making less than $400,000 pays a penny in new taxes and cutting taxes for families with children and low-income workers." The proposals include a previously outlined quadrupling of the Inflation Reduction Act (IRA) stock buyback excise tax from 1% to 4% and billionaire's tax to impose a 25% minimum tax — higher than the previously proposed 20% — on total income, inclusive of unrealized capital gains, for taxpayers with wealth of greater than $100 million.
The Budget is a blueprint for the President's preferred policies irrespective of their chances of being enacted, and generally is intended to strike a contrast with spending cuts called for by House Republicans, which may not be detailed until their budget resolution is released in May. It continues to call for tax provisions that fell out of the Build Back Better negotiations that eventually led to the IRA, including:
The proposal to reform the taxation of capital income would tax long-term capital gains and qualified dividends of taxpayers with taxable income of more than $1 million at ordinary rates, with 39.6% generally being the highest rate, or 44.6% including the Net Investment Income Tax (as stated in footnote #20 of the Treasury Green Book).
President Biden's budget proposes to prolong the Medicare Trust Fund through provisions that include increasing the Medicare tax rate on earned and unearned income above $400,000 from 3.8% to 5%, similarly increasing the Net Investment Income Tax (NIIT) rate to 5% for those above that income threshold, and expanding the tax to include business income, as well as income from investments, wages, and self-employment.
The application of the NIIT to business income, which was in the House Build Back Better Act (BBBA) and increase in the rate would raise $650 billion in additional revenue. The quadrupling of the stock buyback excise tax would bring in $238 billion in additional revenue. House-passed BBBA GILTI-related changes included in the Budget would raise nearly $500 billion and would be more taxpayer favorable than FY2022 budget proposals that were not included in the FY2023 budget because they were made part of that Budget's baseline. Overall, the FY2024 Budget includes $4 trillion in net tax increases, which is more than the $2.5 trillion in the FY2023 Budget, but that baseline assumed passage of House-passed BBBA.
The Treasury General Explanations of the Administration's Revenue Proposals document is available here.
For additional information with respect to this Alert, please contact:
Washington Council Ernst & Young