A Big Bill, A Distributional Analysis

Chairman Neal’s tax bill: Big, bold, with hits and misses. TPC’s Howard Gleckman boils the bill down to its essence: It’s big. Really big. He outlines some hits and misses, like increased IRS enforcement funding (a hit) and the 3 percentage point surtax on income over $5 million, in addition to a new 39.6 percent tax bracket for joint filers earning over $450,000 (a miss). 

JCT: Neal’s tax plan would hit millionaires the hardest. The Joint Committee on Taxation released its distributional analysis of the plan. Households with at least $1 million in annual income would pay 10.6 percent more in taxes in 2023. Their average federal tax rate would climb from 30.2 percent to 37.3 percent. Low-income households would receive large tax cuts for the first few years because of the bill’s extension of the expanded child tax credit and other refundable credits. Once many of those tax benefits expire after 2025, all but the lowest income households would pay more in taxes. However, that assumes all of the individual provisions of the 2017 Tax Cuts and Jobs Act also expire in 2025.

Virginia’s revenue report is rosy. The state’s Secretary of Finance latest revenue report shows tax collections for August 2021 were 18.9 percent higher than August 2020. This reflects increased income tax collection thanks to higher employment, and increased sales tax revenue  from the reopening of businesses. 

But Virginia’s conservation tax incentives present a sad picture. The state’s Secretary of Natural Resources called tax incentives for land ownership and conservation “relics of a past that has actively discriminated against people of color.” The Department of Conservation and Recreation found that more than 95 percent of the state’s $1.8 billion conservation budget over the past two decades went to the tax credit program. More than 30 percent was for land conservation in historically wealthy and largely White counties.

Russia plans new taxes on foreign-owned digital services. The Putin government proposed a tax on foreign technology firms’ digital services. Putin’s administration says that’s in line with the global effort to agree on new tax rules for the tech sector. But Reuters reports it’s also part of the Russian government’s broader effort to strengthen control over the internet and promote domestic alternatives to Silicon Valley firms’ services. Russia  already enacted tax cuts for domestic tech firms. 

For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky at [email protected].

https://www.taxpolicycenter.org/daily-deduction/big-bill-distributional-analysis