ISO: A bipartisan infrastructure bill. The Washington Post reports that the White House is looking at ways to negotiate a compromise measure with a group of moderate Republicans. There is a wide gulf between the president’s $2.2 trillion plan, which includes significant tax hikes on corporations, and a $568 billion framework with no specified pay-fors being discussed by a small group of Senate GOP lawmakers. While talks are ongoing, neither side is confident they will lead anywhere.
Treasury Secretary Yellen: Greatest threat to economic recovery is lack of support for workers and families. Yellen said the threat is not President Biden’s proposed higher tax rates for corporations and the top 1 percent of taxpayers. “Asking ‘will these tax increases hurt the economy?’ is not the right question,” Yellen said on CNN. “The right question is: ‘Is trading higher taxes on high-income taxpayers for middle-class tax cuts and major economic investments pro-growth?’ And the answer to that question is a resounding yes.”
Will it be easy for the wealthy to avoid Biden’s capital gains tax increases? PWBM says yes. The Penn Wharton Budget Model says the wealthy will find ways to avoid 90 percent of Biden’s proposals to raise capital gains tax rates for households making $1 million or more and to tax gains at death for some wealthy decedents. The study estimates that legal tax planning would sharply reduce the expected revenue from Biden’s proposals. Wealthy Americans might avoid selling assets, realize gains in years when they can use other investment losses to lower taxable net gains, or sell investments slowly over time to minimize the amount of tax owed in any one year.
But TPC’s McClelland concludes that many wealthy investors may dodge the tax increase, but the bulk of their gains may not. Rob McClelland writes that while many very high income investors have income barely above the $1 million level and thus could find ways to time asset sales to avoid Biden’s tax rate hike, many of the gains themselves are received by those making far more than the threshold. In addition, by taxing unrealized gains at death, Biden would remove much of the benefit from delaying realizations. He concludes “For the super-rich, smart advisors and attorneys will look for ways their clients can avoid the new capital gains taxes…. But carefully writing the new law will help to limit the effectiveness of these strategies, so the details are going to matter. A lot.”
Remember former President Trump’s tax returns? The Biden Administration is asking for more time to establish its position in a lawsuit over House Democrats’ request for former President Trump’s tax returns. The House Ways & Means Committee sued two years ago when Treasury ignored its requests for six years of Trump’s tax filings. The Biden Treasury has not yet decided whether it will provide the panel with those documents.
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