Biden’s draft spending plan will inspire US tax reform

Significance

White House efforts to hike corporate tax and the rate paid by individuals with annual incomes over USD400,000 have stalled. In their place, bills have been put forward to tax large companies on their book profits and to tax billionaires on unrealised capital gains.

Impacts

• The income tax surcharges on multimillionaires will impact some 22,000 taxpayers, not just 700-800 billionaires.
• Taxing corporate book income would disadvantage executive stock-based compensation.
• Changing the tax code for reasons of political expediency is at high risk of unintended consequences.
• Any new tax on the unrealised capital gains of the rich will likely eventually trickle down to average taxpayers.