The legislation now heads to the U.S. House of Representatives, where they are scheduled to vote on the package tomorrow.
Last weekend, the Democrats in the U.S. Senate passed their tax, healthcare, and energy package without a single Republican vote using the reconciliation process. The legislation now heads to the U.S. House of Representatives, where they are scheduled to vote on the package tomorrow along party lines once again.
In good news for independent agents, the legislation did not include any of the potential small business tax increases that the Big “I" advocated against for the last 19 months.
In total, the package would spend $433 billion, including $369 billion on energy and climate change programs. It would spend another $64 billion to extend Affordable Care Act subsidies for another three years.
Meanwhile, the legislation is estimated to raise more than $700 billion in revenue. The bill would raise roughly $300 billion from a 15% corporate minimum tax. The corporate alternative minimum tax (AMT) proposal would impose a 15% minimum tax on adjusted financial statement income for corporations with profits in excess of $1 billion.
The bipartisan Joint Committee on Taxation (JCT) estimated this provision could raise up to $16.7 billion in revenue from those making under $200,000 as the JCT assumes companies would pass along part of their tax increase to employees by reducing their after-tax wages and job opportunities. Additionally, this estimate takes into account that shareholders would likely take a hit since the value of their stock holdings, including those held in pensions and mutual funds, would likely decline.
The legislation is also estimated to raise more than $200 billion due to prescription drug pricing reform that would allow Medicare to negotiate certain drug prices. This provision would also cap Medicare patients' out-of-pocket expenses at $2,000 per year.
The legislation is expected to raise an additional $200 billion through stricter IRS tax enforcement via the hire of tens of thousands of new IRS employees. The Big “I" joined several organizations representing millions of Main Street businesses in sending a letter to congressional leaders noting our concerns with this provision and its potential to target law-abiding small businesses for unnecessary audits.
The legislation is estimated to raise an additional $52 billion by extending existing limits on how certain businesses can write off their losses for another two years. This provision was initially created in the Tax Cuts and Jobs Act and had previously been extended through Jan. 1, 2027, in the American Rescue Plan. Finally, the legislation included a 1% tax on stock buybacks, which is expected to raise an additional $73 billion.
In a big win for the Big “I," the legislation does not include a tax increase on small businesses that had been in a potential agreement just weeks ago. The provision would have expanded the 3.8% net investment income tax (NIIT) to include taxpayers who actively participate in their business and have adjusted gross income in excess of $400,000—or, in the case of a married taxpayer filing a joint return, $500,000. Currently, the NIIT only applies to passive income. The Big “I" advocated against the provision and sent an opposition letter to Congressional leadership just two weeks ago.
In addition to the exclusion of the NIIT expansion, the legislation did not include any of the most onerous small business tax provisions that Democrats had been considering over various points during the last 19 months. These provisions included capping or eliminating the 20% small business deduction; increasing tax rates on Big “I" members both on the corporate side and the individual side, which would impact Big “I" members organized as pass-through businesses; increasing the capital gains tax; and limiting stepped-up basis.
The Big “I" worked diligently to oppose all of these potential tax increases on our membership.
Wyatt Stewart is Big “I" assistant vice president of federal government affairs.