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May 3, 2021

White House Unveils Tax, “Human” Infrastructure Plan

In remarks before a joint session of Congress on April 28, President Joe Biden unveiled his American Families Plan (AFP). The AFP is a $1.8 trillion package of individual and family related proposals to build “human” infrastructure. It would be paid for with a number of tax increases and increased IRS enforcement.

On the tax side, the AFP would:

  • Raise the top individual tax rate to 39.6 percent from 37 percent.
  • Increase the top individual capital gains and dividends tax rate from 20 percent (23.8 percent when including the 3.8 percent net investment income tax) to 39.6 percent (or 43.4 percent when including the net investment income tax) for households that earn more than $1 million annually. (The nonpartisan Tax Foundation has explained what the investment tax burden would be in each state when combined with the higher federal levy. Read its analysis here.)
  • Repeal stepped-up basis, a provision that allows family-owned businesses to pass their company on to the next generation when a founder dies without incurring a significant tax burden based on the capital gains accumulated during the founder’s lifetime. (Read more about the impact of this proposal here.

The National Association of Manufacturers has created a portal that employers can use to send a letter to lawmakers asking them to vote against these tax increases, which would affect family-owned businesses. MSCI urges its members to use this tool, which can be found here.

For taxpayers who pay through the individual rate tax system, the White House said tax bills would rise for couples who earn more than $509,000 a year and individuals who earn more than $453,000.

As a reminder, MSCI’s tax advocacy principles ask that policymakers:

  • Ensure a globally competitive North American manufacturing industry by reducing, not increasing, the tax burden on members of the U.S. metals industry;
  • Ensure the 28 million businesses that pay their federal taxes through the individual income tax code are treated equitably and fairly;
  • Ensure the tax code does not benefit certain individuals, businesses, or industries over others;
  • Allow U.S. companies that have a global footprint to bring back their overseas profits without double taxation; and
  • Put in place permanent policies that foster certainty and avoid temporary fixes that breed business and individual taxpayer anxiety.

Read more here.

On the spending side, President Biden’s plan would:

  • Provide workers with a total of 12 weeks of guaranteed paid parental, family, and personal illness leave;
  • Create a $39 billion program that provides two years of subsidized tuition for students from families earning less than $125,000 who are enrolled in four-year historically Black colleges and universities or other minority-serving institutions;
  • Provide up to $1,400 in additional assistance to low-income students by increasing the Pell Grant award;
  • Invest $109 billion to make two years of community college free;
  • Provide families with more aid to pay for child care and bring child care workers’ wages up to $15 an hour;
  • Invest $200 billion in universal preschool;
  • Expand the child tax credit until 2025 and make it fully refundable permanently (families with children under the age of six would receive $3,600 per child while those with children between the ages of six and 17 would receive $3,000); and
  • Make the enhanced earned income tax credit permanent.