Higher Taxes Proposed by Biden Administration

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The Tax Cuts and Jobs Act of 2017 has several provisions set to expire in 2025, including higher standard deductions and lower tax brackets. The TCJA also included a permanent tax break for corporations. Rather than facing a 35% tax rate, corporations are now taxed at a flat rate of 21% at the federal level. Lael Brainard, President Biden’s top economic advisor, has unveiled plans to update these provisions ahead of their expiration date.

Without extending these tax cuts, average American families could see their tax bill increase by “nearly $7,500 a year”. For provisions primarily benefitting middle-class Americans, the Biden administration proposes extending the expiration date. However, these extensions would not come without a cost. Already, the Congressional Budget Office has warned that extending TCJA tax breaks would heighten national debt fears. If extended permanently, the budget deficit could rise by $4.6 trillion.

To pay for the extensions on tax cuts for middle-class Americans, Biden’s team proposes slashing tax breaks for the “ultra-wealthy and scal[ling] back costly permanent corporate tax breaks”. Lael Brainard said that in order to achieve Biden’s “tax fairness” pledge, extensions for tax cuts which benefit those with an income of $400,000 or more cannot be granted.

Currently, formal legislation to enact tax break extensions or cuts have not been revealed. So far, House Republicans have formed teams to come up with solutions before the Act’s expiration date. However, business owners with high income should begin to take action now. Tax planning can save you thousands of dollars on your tax return. To learn more and get ahead of potential tax legislation in the coming year, reach out to XQ CPA’s tax team, and read a copy of our tax planning guidebook, exclusively on the XQ CPA website.

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Sources:

https://www.cnbc.com/2024/05/10/biden-higher-taxes-wealthy-for-middle-class-tax-breaks.htmlhttps://www.cnbc.com/2024/05/10/biden-higher-taxes-wealthy-for-middle-class-tax-breaks.html