What to Know in Washington: Tax Breaks Targeted in Biden Budget
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President Joe Biden is calling for an end to valuable tax breaks for private equity fund managers, oil companies, along with investors in crypto and real estate, in his upcoming budget proposal.
The White House plans to target a series of high-profile tax breaks worth tens of billions of dollars for wealthy investors and corporations in the president’s budget request to Congress that will be made public Thursday, according to a summary of the proposal. Eliminating these would upend the economics of many real estate and investment-fund deals — forcing Wall Street to reinvent the way that many transactions have been done for decades — if they were to become law.
The Republican-controlled House will block any bill to eliminate the tax preferences, but the administration’s documents foreshadow the issues Biden will likely put at the center of his economic platform should he run for a second term in 2024.
“The budget cuts wasteful spending on Big Pharma, Big Oil and other special interests, cracks down on systemic fraud and identity theft, and makes programs more efficient and cost-effective — saving taxpayers hundreds of billions of dollars,” according to the summary document.
Biden is proposing eliminating the carried-interest tax break, which allows private equity managers and venture capitalists to pay lower rates on their earnings from the investments they make.
The Biden plan also ends a longstanding tax break for real estate investors who can avoid paying capital gains taxes on their profits if they continue to invest the proceeds in other properties.
The administration is also calling to end a break that allows crypto investors to sell their assets at a loss — generating big tax savings — and then immediately repurchase those currencies.
In addition, all special tax preferences for oil and gas companies would be terminated, saving $31 billion. Laura Davison previews the highlights in Biden’s budget.
Biden is also proposing a series of new tax increases on billionaires, rich investors and corporations in his proposal for how Congress should prioritize taxes and spending.
Biden’s budget request calls for a 25% minimum tax on billionaires, according to a White House official familiar with the proposal who declined to be named because the plan is not yet public. The plan would also nearly double the capital gains tax rate for investment to 39.6% from 20% and raise income levies on corporations and wealthy Americans.
The proposal, largely a reprise of Biden’s multi-trillion dollar Build Back Better economic package, has little chance of passing Congress, particularly now that Republicans control the House. Biden was unable to pass similar tax increases when Democrats enjoyed control of both chambers of Congress, instead settling for slimmed down legislation focusing on energy and health policy known as the Inflation Reduction Act.
But the White House’s proposal foreshadows both Democrats’ strategy ahead of high-stakes negotiations over the debt ceiling and government spending later this year, as well as the economic platform underpinning an expected Biden reelection campaign. Davison and Justin Sink have more details.
Join Bloomberg Government’s budget experts on Friday for a deep dive into Biden’s budget request for fiscal 2024 and what it means with a divided Congress. Learn more .
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