President Biden is calling for wealthy Americans and corporations to pay more in taxes. The president outlined a number of changes he believes will help reduce the budget deficit and level the playing field between the very rich and everyone else during his state of the union address.
Caveat: The upcoming election will determine if any of the following tax revisions pass. The last significant changes to federal tax laws were made by President Trump when Republicans controlled both chambers of Congress.
28% corporate tax rate a goal for Democrats
Here are the tax code priorities that the Biden administration will pursue if given a second term:
The corporate tax rate will go up to 28%. The GOP lowered the rate to 21% in 2018 to help spur economic investment and development in the U.S. Biden and most Democrats argue large corporations aren’t investing the savings in areas like research & development or domestic job production. Many companies continue to put profits toward stock buybacks (more on that point below).
A corporate minimum tax of 21% would “ensure that billion-dollar corporations pay at least 21% of their income in taxes, building on the Inflation Reduction Act’s corporate minimum tax,” according to the White House press release. Multi-national and pharmaceutical companies would also fall under a new 21% baseline rate.
The stock buyback tax would quadruple from 1% to 4%. Goldman Sachs estimates $1 trillion in stock buybacks are on tap for 2025.
No more corporate tax deductions for companies that pay $1 million salaries or higher. The goal here is to end tax breaks for executives. CEO pay averaged more than 300 times that of the average worker in 2022.
IRS is now targeting wealthy tax ‘cheats’
The Internal Revenue Service is already pursuing wealthy individuals who aren’t filing. IRS announced it would conduct 125,000 audits “focused on high earners, including millionaires, who failed to file tax returns.” The total income amounts to $100 billion, averaging $800K per individual case.
Also: IRS is using “advanced analytics” and AI to determine if business owners and executives are claiming tax deductions for corporate jet use. IRS corporate jet audits will focus on large corporations, large partnerships and high-income taxpayers.
