President Biden's Tax Proposals
Tax & AccountingMarch 09, 2021

President Joe Biden's Tax Proposals

(NEW YORK, NY, March 2021) - When elected, many Presidents have been quite successful in getting a substantial portion of their tax proposals enacted in the first two years in office. President Joe Biden has divided his tax proposals into two efforts. The priority tax package he is looking to enact quickly focuses on immediate COVID-related relief for individuals and businesses. The longer-term tax package on which he ran and hopes to enact at some point during 2021 is focused on tax increases on wealthier individuals and corporations, tax breaks for lower income taxpayers, and tax provisions to promote domestic job growth and conversion to clean energy.

As a top priority, President Biden proposes a relief package that includes provisions aimed at helping individuals who have lost incomes due to the COVID pandemic and businesses that have been forced to shut down or restrict operations. Many of these proposals are extensions of provisions enacted in 2020 to address the impact of the pandemic on the economy but which have expired or are scheduled to expire soon. The longer-term tax package for later in the year includes provisions that focus on growing the economy post-COVID.

Key Elements of President Biden's COVID Relief Tax Proposals Include:

  • $1,400 stimulus payments, including payments for children age 17 and over who are dependents and adult dependents
  • Expand Child and Dependent Care Credit to 50 percent of expenses
  • Expand Child Tax Credit to $3,600 for children under age 6 and to $3,000 for children age 6 to 17
  • Raise Earned Income Tax Credit for a year to close to $1,500 for childless adults, with income limits to $21,000 and expand to older workers
  • Expand Affordable Care Act premium subsidies
  • Extend paid sick and family leave benefits to September 30, 2021, expand employers subject to the requirements and extend to federal workers, and extend to 14 weeks of paid leave
  • Extend employee retention credit to December 31, 2021
  • These COVID relief proposals generally apply for 2021 only

Key Elements of President Biden's Long-term Tax Proposals from the Campaign Include:

Individual tax increases:

  • Raising the top individual tax bracket back to 39.6 percent with no tax increase on those with incomes less than $400,000
  • Eliminating the special capital gains tax rate for individuals with incomes over $1 million
  • Placing a cap on itemized deductions for wealthier individuals
  • Eliminating stepped up basis at death and returning the estate tax exemption amount and estate tax rates to pre-Trump levels

Individual tax breaks:

  • Increasing economic stimulus payments in response to the coronavirus epidemic to $2,000
  • Increasing the Child Tax Credit and the Child and Dependent Care Credit
  • For seniors, increasing tax benefits for retirement savings used for long-term care, expanding Social Security taxes on those with incomes over $400,000, and making low-wage workers over age 65 eligible for the Earned Income Tax Credit
  • For caregivers, creating a $5,000 tax credit for informal caregivers and making caregivers eligible for catch-up contributions to retirement accounts
  • A cap on itemized deductions for wealthier individuals
  • For affordable housing, creating a refundable credit for first-time homebuyers, payable at closing, and a tax credit for low-income renters

Business taxes:

  • Raising the top corporate tax rate to 28 percent from 21 percent and phasing out the 20 percent qualified business income deduction
  • Imposing a minimum 15 percent tax on large corporations, imposing tax punishments on businesses that shift jobs overseas, and enhancing tax breaks for businesses that expand domestic jobs
  • Addressing climate change with enhanced tax credits for electric vehicles; energy-efficient homes and businesses; and carbon recapture, use and storage; and eliminating tax breaks for fossil fuels
  • For affordable housing, expanding the low-income housing credit and reforming the Opportunity Zone program for more focus on community benefit

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Mark Luscombe
Principal Federal Tax Analyst
Mark Luscombe, a CPA and attorney, is the principal federal tax analyst for Wolters Kluwer Tax & Accounting. He is the current chair of the Important Developments Subcommittee of the Partnership Committee of the American Bar Association Tax Section and speaks on a wide range of tax topics. He authors monthly columns in Accounting Today and TAXES magazine. Prior to joining Wolters Kluwer, he was in private practice with several Chicago-area law firms where he specialized in taxation.