Tax News & Views Budget Bonanza Roundup

March 10, 2023

Biden’s Budget Sets Up Battle With GOP, Would Cut Deficits by $3 Trillion Over 10 Years – Andrew Restuccia, Andrew Duehren and Annie Linkey, Wall Street Journal ($):

In total, the budget outline calls for more than $4.5 trillion in tax increases, including higher tax rates on corporations and high-income individuals, expanded Medicare taxes on top earners and higher taxes on U.S. companies’ foreign income. The White House has said wealthy people and corporations should pay significantly more.

Biden Fires $6.9 Trillion Salvo to Open Budget Showdown - Justin Sink and Erik Wasson, Bloomberg ($):

Biden proposes nearly doubling the capital-gains rate for those making at least $1 million, a 25% minimum tax on billionaires, and creating a new top income tax bracket at 39.6% for those making over $400,000. The president also wants to hike the corporate tax rate from 21% to 28%, end Medicare and retirement tax loopholes used by the wealthy, and eliminate breaks for real estate investors and oil and gas industries.

More details:

Capital-Gains Tax Nears 45% in Biden’s Plan to Target Ultra-Rich – Laura Davison, Bloomberg ($):

The budget proposal would increase the capital-gains rate to 39.6% from 20% for people earning at least $1 million to equalize the taxation of investment and wage income.

Biden is proposing to raise the top personal-income tax rate to 39.6%, from 37%, for those making more than $400,000.

In addition, Biden proposes expanding the Obamacare net investment-income tax — which is currently 3.8%, but he is calling to increase it to 5% — so that it applies to all incomes 'without loopholes,' not just investment proceeds, over $400,000, according to the White House.

The Treasury explanation of the budget's tax proposals is here.


Presidents' budgets do not become law, but Congress can approve them. This one is not expected to be approved:

Biden calls for trillions in tax hikes and new domestic spending – Jeff Stein and Tony Romm, Washington Post:

The budget will not pass through a Republican-controlled House, as GOP lawmakers already declared it a non-starter. 

Despite whether a president's budget passes Congress or not, proposals within it can be included in legislation that ultimately gets enacted. Biden's tax increase proposals are unlikely to be included in legislation that becomes law:

Biden Releases Budget, includes Tax Increases that won’t Become Law – Jay Heflin, Eide Bailly:

President Joe Biden delivered to Congress on March 9th his budget request that includes tax increases that are highly unlikely to pass in the current Congress…

Republicans control the House of Representatives and have vowed to not pass legislation that increases taxes. Legislation cannot become law if it does not pass the House.


One possibility for enactment in Biden's budget is extending the Trump tax cuts for the middle-class. The GOP wants to extend them and so does Biden:

Budget of the U.S. Government – The White House:

The President: …Opposes increasing taxes on people earning less than $400,000 and supports cutting taxes for working people and families with children to give them more breathing room;


IRS Nominee Danny Werfel Confirmed in Bipartisan Senate Vote - Chris Cioffi, Bloomberg ($):

Six Senate Republicans joined the Democrats to confirm Danny Werfel to be the next IRS commissioner on a 54-42 vote.

Werfel succeeds acting commissioner Douglas O’Donnell, who has served in that role since former commissioner Chuck Rettig’s term expired last November.

More budget stuff:

Biden Seeks $14.1B for IRS in Budget Pitch - Naomi Jagoda, Bloomberg ($):

President Joe Biden’s budget proposal, released Thursday, calls for $14.1 billion for the IRS for fiscal 2024, a 15% increase from the enacted level for this year.

The budget includes a $642 million increase for taxpayer service improvements and expanding outreach, and also includes $290 million for business systems modernization — a category that didn’t receive funds in the fiscal 2023 omnibus spending bill enacted in December.

These figures are separate from the $80 billion the IRS will receive over the next ten years from the Inflation Reduction Act. 


Tax Deadline Extension Dispute Dismissed Over Jurisdiction - Jeffery Leon, Bloomberg ($). “A company arguing that a deficiency notice from the Internal Revenue Service was invalid had its case tossed by the US Tax Court because it lacked the jurisdiction to fight the case since the deficiencies were aimed at another company it merged with.”


New York Judge Reduces Couple’s Empire Zone Tax Reduction Credit – Perry Cooper, Bloomberg ($). “Roland and Susan Beck claimed Qualified Empire Zone Enterprise tax reduction credits of $770,670 for tax year 2015 and $339,010 for tax year 2016. The New York Division of Taxation reduced those credits by $618,391 in 2015 and by $266,574 in 2016. The state said the couple improperly based their calculation on the amount of their income that was allocated to the state instead of the amount of the S corporation Tessy Plastics Corp. income that was allocated to the state.”


How Companies Can Comply With Washington State’s New Excise Tax - Alyssa Rausch, Bloomberg ($, emphasis added):

Gov. Jay Inslee signed S.B. 5096 in May 2021, creating a 7% excise tax on net long-term capital gains in excess of $250,000 for individuals. The new tax, which took effect on Jan. 1, 2022, has stirred up so much debate among Washingtonians that opponents launched a court challenge. They won a tthe trail court level, when the Douglas County Superior Court deemed the tax unconstitutional, but the state appealed the ruling.

On Jan. 26, 2023, the Washington State Supreme Court heard arguments that centered on whether the tax on long-term capital gains is an excise tax (triggered from sale or exchange) or is an income tax (generated due to the recognition of income), and whether the capital gains tax is constitutional. A decision won’t be made until after the April 18 deadline for the first excise tax payment. Taxpayers must make excise tax payments while the decision is pending to stay compliant with the law.


Arkansas Governor Signs Law Amending Electronic Filing of Certain Sales and Use Tax Returns – Bloomberg ($):

The law includes measures: 1) stating that a taxpayer who has an average monthly gross receipts and compensating use tax liability of $5,000 or more for the preceding fiscal year beginning on July 1 and ending on June 30 must file all required returns and remittances electronically; and 2) authorizing the secretary to waive the electronic filing and payment requirements if it determines that filing the return electronically would cause an undue hardship on a taxpayer. The law is effective for tax years beginning on or after Jan. 1, 2024.


Biden Proposal Tries to Align US With Global Minimum Tax - Michael Rapoport, Bloomberg ($):

President Joe Biden is trying again to bring the US in line with a pending global minimum tax, proposing the same kinds of changes to the international regime that he’s pushed in the past.

The White House said Thursday it wants to double the tax rate on US multinationals’ foreign earnings, and make other changes that would align the US with the global minimum tax known as Pillar Two, part of the 2021 global tax agreement that nearly 140 countries have signed.

Breaking news: This morning Treasury Secretary Janet Yellen told the tax-writing House Ways and Means Committee that she expects Congress will pass Pillar Two legislation. 


Justices' FBAR Ruling May Shift Feds' Enforcement Approach – Dylan Moroses, Law360 Tax Authority ($):

Following the U.S. Supreme Court's decision limiting the penalty for a nonwillful failure to report foreign bank accounts to $10,000 per year, the government may become more aggressive in pursuing willful violations of the law, tax lawyers said.


From the “Let the Scare Tactics Begin” file:

President Biden’s $4.7 Trillion Tax Hike Proposal: Small Businesses Must Send a Bigger Check to Washington – House Ways and Means Committee:

President Biden’s Fiscal Year (FY) 2024 budget request calls for a $4.7 trillion tax hike...

Bottom line: President Biden is proposing his biggest tax hike to date—$4.7 trillion that will fall on small businesses and hardworking Americans.

This message comes from Republicans who run the House Ways and Means Committee. This panel is responsible for writing tax legislation that can become law. These lawmakers have no intention of including Biden’s tax increases in any bill they pass, which means these tax increases will likely not become law. This message is basically an empty threat. Boo!


Happy International Bagpipe Day! What?!? I can’t hear you!

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