Biden budget tax plan: The US Treasury revealed on Monday that President Joe Biden's proposed budget blueprint aims to boost tax revenues by $4.951 trillion over the span of 10 years, with substantial increases targeted at businesses and wealthy individuals totaling over $2.7 trillion and nearly $2 trillion respectively.

Outlined in the Treasury's "Green Book" estimates, the budget plan also allocates an additional $104.3 billion in mandatory funding for the Internal Revenue Service (IRS), supplementing the $80 billion secured by the agency in 2022. This augmentation is anticipated to generate an extra $341 billion in revenue over the decade compared to existing funding levels.

Biden's budget proposal, viewed as a wishlist for the election year, includes provisions to address the high housing and childcare costs faced by low- and middle-income Americans, while aiming to reduce the deficit. Although these proposals are expected to face resistance in Congress, they form a central narrative for Biden's campaign.

Addressing shortfalls

Reforms in international business taxation, catalysed by the implementation of a global 15 per cent minimum tax agreement by 137 countries in 2021, are estimated to contribute $632.2 billion to US receipts over the next decade. However, revisions in assumptions regarding the adoption of the minimum tax by other countries led to a decrease from last year's estimate of around $1.16 trillion.

To offset this reduction, the Treasury proposes raising the domestic large-company minimum tax to 21 per cent from 15 per cent, expected to generate $137.4 billion over 10 years. Furthermore, the elimination of tax incentives for fossil fuel energy firms would yield $45.1 billion in additional revenues through 2034, while a corporate tax rate hike to 28 per cent from 21 per cent is estimated to generate $1.35 trillion.

Tax reforms targeting the wealthy

The Treasury's estimates project that tax adjustments targeting affluent individuals, including new estate transfer regulations and restrictions on high-income individuals' use of tax-advantaged retirement accounts, would generate $1.96 trillion. This total encompasses Biden's "billionaire tax," proposing a 25 per cent minimum tax on individuals with wealth exceeding $100 million, expected to raise $502 billion over the decade.

Furthermore, the Treasury advocates for increased IRS funding to facilitate enhanced audits of wealthy individuals and complex business entities, with internal estimates suggesting greater revenue potential from IRS modernisation initiatives.

The budget also introduces several measures to alleviate the housing affordability crisis, including a $10,000 tax credit spread over two years for first-time homebuyers to offset high interest costs, and a one-time $10,000 credit for sellers of "starter homes" to bolster market inventory. Together, these initiatives are projected to cost $47.3 billion over the 10-year period.

In sum, the budget's tax proposals to aid moderate-income families, encompassing housing credits and expanded tax credits for children and health insurance premiums, are estimated to cost $764.9 billion over the next decade, according to the Treasury's assessments.

(With Reuters inputs.)