Can the Democrat’s agree on a reconciliation bill? President Joe Biden’s tax proposal continues to be revamped as they inch closer to the finish line. And it appears that a majority of former President Donald Trump’s 2017 tax cuts will remain in place.
It is still unclear what measures will make the final cut as negotiations continue. What revenue-raisers will pass to help pay for the $1.75 trillion social-spending bill? The White House recently released a fact sheet including the expected components. The fact sheet indicates that some of Biden’s core proposals, such as increasing the corporate rate, the top individual income tax rate, and the capital gains rate, are likely out, while other unique ideas, such as a minimum tax on the profits of corporate financial statements and a surtax on millionaires, are taking their place.
Democrats are also considering a five-year suspension of the $10,000 deduction limitation for state and local tax (SALT) on the federal return. Democrats have been looking at several options for SALT relief and the temporary suspension has become the leading option in discussions surrounding the SALT deduction limit. One option under consideration is suspending the cap for all taxpayers from 2021 to 2025. The $10,000 cap would then be reinstated from 2026 to 2030. Another option lawmakers are considering is suspending the cap for 2022 and 2023 and re-imposing the $10,000 limit for 2024 through 2027. However, there is currently some pushback in Congress which could be enough to block the bill.
At this point, it is impossible to say which proposals will survive and be enacted into law.