Last Friday, before everyone went home for Memorial Day Weekend, the Biden Administration released their fiscal year 2022 Budget proposal. In his proposal, President Biden called for $6 trillion in spending in the coming fiscal year, with annual deficits of more than $1.3 trillion ($14.5 trillion) over the next decade.
Biden's proposal envisions tackling annual budget deficits in the second half of the decade, decreasing from $3.6 billion in 2022 to $1.5 billion in 2031. White House Office of Management and Budget Acting Director Shalanda Young told reporters on a conference call that the deficits are manageable as long as interest rates stay low. Biden's plan predicts GDP growth of 5.1% in calendar year 2021, 4.3% in 2022, 2.2% in 2023, and 1.9% in the second half of the decade. Its unemployment projections are a drop from the current level of 6.1% to 4.1% in 2022, and 3.8% in 2023 and beyond.
The Biden Administration also released the “General Explanations of the Administration’s Fiscal Year 2022 Revenue Proposals,” commonly called the Treasury Department’s “Green Book.” The Green Book provides more details regarding the Administration’s tax proposals.
The President’s budget kicks off the annual budget process. Now, it’s up to Congress to put together a budget to pass and send to President Biden for his signature, though that process is expected to take some time.
While the President’s budget is typically written off as a “wish list,” it’s important for that very reason, especially in a new administration: This is a window into the new President’s policy agenda and priorities. With that in mind, a complete breakdown of the budget by sector can be found below:
Click to see a deep dive on section:
Along with the budget, President Biden released the General Explanations of the Administration’s Fiscal Year 2022 Revenue Proposals, commonly referred to as the “Green Book.” As the longer name indicates, the Green Book is a summary of the Administration’s tax proposals. Below are highlights from the Green Book.
You can find the full Green Book here.
Corporate Tax Proposals:
- Raise the corporate income tax rate from the current 21% to 28%.Impose a 15% minimum tax on global book income of large corporations.
- Overhaul international tax provisions: including reducing the global intangible low-taxed income (GILTI) deduction to 25%, replacing the base erosion anti-abuse tax (BEAT) and a new stopping harmful inversions and ending low-tax developments (SHIELD), and repealing the deduction for foreign-derived intangible income (FDII).
- Eliminate key fossil fuel tax provisions: including the Master Limited Partnership (MLP) structure, the Section 263(c) deduction for intangible drilling costs (IDCs), percentage depletion, the exemption for foreign oil and gas extraction income (FOGEI) from GILTI, the Section 43 enhanced oil recovery (EOR) tax credit, the Section 45I credit for oil and gas produced from marginal wells, and expensing for exploration and development costs.
- Expand and enhance existing renewable energy tax incentives: including the production tax credits for wind, solar, and other renewables, the Section 45Q carbon oxide sequestration, the credit for electric vehicle charging station, and credits for energy efficiency and electrification.
- Create new renewable energy tax incentives: including production tax credits for low-carbon hydrogen and nuclear power, a tax credit for the purchase of heavy- and medium-duty zero-emissions vehicles, a tax credit for sustainable aviation fuel production.
Individual Tax Proposals:
- Raise the top marginal income tax rate from 37% to 39.6% for individuals earning more than $452,700 ($509,300 for joint filers).
- Raise the tax rate on long-term capital gains and qualified dividends to 39.6% for households earning more than $1 million.
- Removing “stepped-up basis” for property in excess of $1 million.
- Make permanent expansions to the earned income tax credit for childless workers and the child and dependent care credit.
- Extend expansions to the child tax credit through 2025.