Ed Renn discusses President Biden's budget proposals with Accounting Today

As lawmakers analyze and challenge President Biden's budget and tax proposals, Ed Renn provided his own thoughts on the proposals in the Accounting Today article "Lawmakers Question Biden Budget Proposals as Tax Experts Plan Ahead."

The Biden administration released its budget, earlier this month, with plans for tax increases on the wealthy,  and corporations, and the capital gains rate. Lawmakers have questioned whether any of the proposals will become reality or if they are merely a campaign tactic.

"I really think this is largely a political statement on Biden's part," said Renn to Accounting today. "I don't know how considered it is. They've taken a look at the polls, and people don't like corporations, so they're perfectly willing to take a political stance. I don't think there's necessarily tax rationality or economic justification for some of these proposals. They're what he thinks will play well, at least, with his power base. I think a lot of this is going to go by the boards and we really won't know until you get legislative action. You're not going to get legislative action in a hurry. The House and the Senate are living proof that there's a little bit of dysfunction there. It's easy to say something, but it's another to actually get them to do anything. They all agree, but can't get anything done."

Renn also comments on the effect specific aspects of the proposal would have. When they examine the proposals affecting corporations, he notes the budget proposes to raise the minimum tax for corporations from 15% to 21% and to impose a minimum tax on billionaires of 25%.  Renn told Accounting Today, "the corporate tax increase would be significant because the average global corporate rate is within a percentage or so of where we are right now. That would impact businesses in a big way on profitability." On the topic of the proposal to raise the tax on corporate stock buy backs Renn observed, "the corporations wouldn't be able to deduct any compensation amounts in excess of a million dollars. They have some limited restrictions on that now for CEOs and a handful of top earners. But this is an across-the-board requirement and it appears from the Green Book that they want to include things right now that you're not even taxed on, like your health insurance benefits."   

Individuals would also be highly affected by many of Biden's proposed budget changes. Renn noted to Accounting Today," He wants to take some of the preferential dividends and capital gains rates for high income earners, and subject them to NIIT and also subject them to the 39.6% income tax rate. For some folks, that would be an income tax rate in the low 40s for passive income."  High net worth individuals would also see affects with proposed changes to estate and gift tax strategies as well as life insurance strategies.  "There's a provision in here that they floated in 2021 on excess holdings in retirement plans that would impact life insurance for wealthier people," said Renn. "If you're worth more than $100 million, they want 25% of your net worth, which includes unrealized appreciation. There's only been a couple of countries in the world where you've had that, and it's never worked. There's also this idea of a loss of step up in basis for very wealthy people in their estates, but they'd still pay an estate tax. There's no place in the world where you get taxed on the built-in appreciation and the death tax. It's one or the other."

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