4 minute read 6 Apr 2022
Several tax proposals included in Biden’s FY23 budget

Several tax proposals included in Biden’s FY23 budget

By Washington Council Ernst & Young

Advisory services group that helps clients manage opportunities and risks associated with the legislative and regulatory process.

4 minute read 6 Apr 2022

Changes that would impact international, individual and corporate taxes are included, along with changes to energy and partnership provisions. 

President Biden's FY2023 budget folds most of the House-passed Build Back Better Act (BBBA) into the baseline and assumes it has been enacted, a move likely intended to avoid upsetting any blossoming negotiations later this spring or summer. This means most tax-related spending and other BBBA provisions are not included in the budget text. Other major tax increase proposals are included, even though Congress has little appetite for passing some of them or they face firm opposition from one or more key senators in the 50-50 Senate. 

The budget includes some new items, such as (1) replacing the Base Erosion and Anti-avoidance Tax (BEAT) with part of the OECD Pillar Two rules, called the Undertaxed Payment Rule (UTPR), and (2) imposing a new minimum tax on wealthy individuals, called the "billionaire's tax." The budget also includes tax provisions that fell out of the House-passed BBBA due to opposition in Congress, including:

  • Raising the corporate tax rate to 28%
  • Increasing the top marginal income tax rate (to 39. 6%) for high earners
  • Reforming the taxation of capital income to tax capital gains of high earners at ordinary income rates
  • Taxing carried interests as ordinary income
  • Repealing deferral of gain from like-kind exchanges

Other budget proposals seek to modernize rules for reporting on digital assets, including cryptocurrency, primarily by adding these types of assets to the scope of existing reporting requirements, cut benefits for fossil fuel producers and make changes to insurance tax provisions. 

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Summary

Budget proposals are not legislation and reflect focus areas of the Administration. Congress would still need to include these proposals in legislation for them to become law. 

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By Washington Council Ernst & Young

Advisory services group that helps clients manage opportunities and risks associated with the legislative and regulatory process.