White House releases Fiscal Year 2024 Budget including tax revenue proposals

Executive summary: Release of president’s Fiscal Year 2024 Budget unlikely to spur action in Congress

The Biden Administration released its Fiscal Year (FY) 2024 Budget, which proposes investments that, according to the administration, would be paid for and would reduce the deficit by almost $3 trillion over the next decade through proposed tax increases. Unlike prior budget submissions from this administration, the FY24 Budget was released to a divided Congress and expectations are very low that the proposals will be enacted into law during the 118th Congress. However, certain components, such as proposed changes to reform the international tax system to (among other things) bring it into compliance with the OECD Pillar 2 global minimum tax regime should be monitored by those that are potentially impacted.

The Treasury Department also released their “Greenbook” explanation of the revenue proposals in President Biden’s FY24 Budget. The Greenbook provides additional details on the tax provisions included in the budget, and for the most part, tracks very closely to prior Greenbook explanations issued under this administration.

White House releases Fiscal Year 2024 Budget including tax revenue proposals

The Biden Administration has released its FY 2024 Budget, (FACT SHEET: The President's Budget for Fiscal Year 2024) which, according to the Office of Management and Budget, would generate an approximately $3 trillion-dollar reduction in the deficit over a 10-year window. This reduction would largely stem from more than 100 proposed changes to the tax law – many of which are carried over from previous years- that are projected to raise more than $4.7 trillion dollars in new tax revenue over the next 10 years.

In conjunction with President Biden’s Budget, the Treasury Department released its General Explanations of the Administration's Fiscal Year 2024 Revenue Proposals. This document, referred to as the “Greenbook,” provides detailed explanations of the 100-plus revenue proposals in the Budget.

Notable tax proposals in the Budget include:

• Increasing the corporate tax rate from 21% to 28%
• Restoring the top tax rate of 39.6% for individual taxpayers, up from the current 37%, (which, when combined with the proposed 5% Net Investment Income Tax, would actually bring the highest rate to 44.6%.)
• Increasing the Net Investment Income Tax to 5% and expanding the base to include business income
• Increasing the capital gains tax rate for certain high-income individuals
• Adding a new minimum tax on certain on high-net-worth individuals that would include a tax on unrealized gains
• Addressing divisive reorganizations and losses recognized in certain corporate liquidation transactions
• Increasing the tax on corporate stock buybacks from 1% to 4%
• Reforming the rules for taxing international income
• Eliminating tax incentives for fossil fuels

Other proposals – such as taxing carried interest as ordinary income, taxing capital gains at ordinary rates for taxpayers with income over a certain threshold and ending tax free like-kind exchange treatment for real property – are also carried over from prior years. The budget also indicates that the administration would address various tax cuts sunsetting after 2025, but does not address any provision specifically.

While these proposals are unlikely to become law in their current form in the near term, they are still important in understanding what may be addressed in future legislation.

RSM US LLP will be providing additional information on these developments as warranted.