President Joe Biden noted two tax policy objectives—a billionaire minimum tax and the quadrupling of the 1% tax on stock buybacks—when he laid out his administration’s agenda in his State of the Union address before a joint session of Congress on Feb. 7.
His proposed billionaire minimum tax and the quadrupling of the 1% tax on stock buybacks are designed to make “the wealthiest and biggest corporations begin to pay their fair share;” help fund “investments in our future,” such as clean energy and health care initiatives; and reduce the federal deficit, Biden said. The enactment of such proposals in a divided government is highly unlikely.
The billionaire minimum tax that the White House proposed in March 2022 would require households with a net worth exceeding $100 million to pay a tax rate of at least 20% on their full income, including unrealized capital gains income on unsold investments.
Biden also proposed increasing the tax on corporate stock buybacks from 1%, as established by the Inflation Reduction Act of 2022, to 4%. He hopes an increased rate would incentivize large companies to make long-term investments instead of repurchasing its own stock.
Biden also made passing mention of a few additional tax items. In saying to Congress, “Let’s restore the full child tax credit,” the president referenced a Democratic priority that has affected long-running negotiations to reverse the unfavorable change in tax treatment of research and experimental costs (section 174) beginning in 2022. He also touted a pair of tax items in the Inflation Reduction Act—clean energy credits and increased funding for IRS enforcement.
Again, the tax proposals Biden discussed have limited prospects of passage, but his mention of them helps frame the tax policy dialogue in 2023. These and other tax proposals that were part of his FY23 budget could be proposed again in the FY24 budget that Biden will submit to Congress, as well as the accompanying “Green Book” explanation of provisions from Treasury. The president’s FY24 budget is expected to be released in March.