Tax Issues

Biden Administration Proposed Tax Agenda

  • The Tax Policy Center estimates that President Biden’s tax plan will raise $2.1 trillion
  • President Biden’s tax plan proposes to:
    • increase taxes on businesses, individuals, and investors
    • raise the corporate tax rate from 21% to 28%
    • limit tax preferences for “pass through” companies like limited-liability companies or partnerships
  • In July 2021, the Senate Budget Committee, with the support of Majority Leader Charles Schumer (D-NY), announced a framework agreement of $3.5 trillion in FY2022 Budget Reconciliation instructions to enact Biden’s Build Back Better agenda. The agreement calls for the $3.5 trillion in long-term investments to be fully offset by a combination of new tax revenues, health care savings, and long-term economic growth. In addition, the agreement would prohibit new taxes on families making less than $400,000 per year, and on small businesses and family farms.

Biden Administration Proposed Tax Agenda

  • The Tobacco Tax Equity Act of 2021 (S. 1314 / H.R. 2786), sponsored by Sen. Dick Durbin (D-IL) and Rep. Raja Krishnamoorthi (D-IL)
    • Raises federal excise taxes on all tobacco products and establishes an excise tax for e-cigarettes.
  • MOMMA’s Act (S. 411), sponsored by Sen. Dick Durbin (D-IL)
    • A bill to promote maternal and infant health initiatives
    • Paid for by raising the federal excise taxes on all tobacco products and establishes an excise tax for e-cigarettes.
  • CDA opposes proposals raising the federal excise tax on tobacco products
  • Excise taxes are seen as discouraging certain behaviors, but they are also extremely regressive, taking a larger percentage of income from low-income earners than from high-income earner and this point is antithetical to the Biden Administration’s populist approach to evening the score for lower income Americans through the tax system.
  • The often-used health argument for taxing non-combustible nicotine products doesn’t hold up – all the innovative products - vapor products, heated tobacco, snus, and nicotine pouches are all thought to be considerably less harmful than cigarettes. Encouraging adult smokers to switch should not be discouraged or disincentivized.

Estate Tax

  • In 2001, Congress enacted legislation (PL 107-16) that made significant changes in the federal estate tax – or “death” tax – over the 2001 to 2009 period by gradually increasing the size of estates exempt from the tax and gradually reducing the tax rate applied.
  • Since that time, CDA has been supportive of various efforts in Congress aimed at making the repeal of the estate tax permanent. We believe that permanent repeal of the estate tax will ensure the vitality of America’s small businesses – the backbone of our nation’s economy.
  • The law reduces the corporate rate from 35 to 21% for tax years beginning after December 31, 2017.
  • The bill reduces taxes on pass through entities, seen as key drivers in job creation. The law provides for a 20% tax deduction on the first $315,000 of joint income earned by all businesses organized as S corporations, partnerships, LLCs and sole proprietorships. The bill reduces their effective marginal tax rate to no more than 29.6%.
  • It allows businesses to immediately write off the full cost of new equipment to improve operations and enhance the skills of their workers - unleashing growth of jobs, productivity and paychecks.
  • The bill provides immediate relief from the Death Tax by doubling the amount of the current exemption (from $5.49 million per person to $10 million per person) to reduce uncertainty and costs for many family-owned businesses when they pass down their life's work to the next generation. The provision is in effect for tax years 2018-2025.