March 2024 / United States

March 8 2024

US, President Biden’s Proposals in Sweeping State of the Union Address

In his final State of the Union address for his first term as President on 7 March 2024, Joe Biden proposed sweeping tax proposals that he plans to deliver in his final year in Office.

The President noted several tax-specific proposals that build upon existing tax law, some mentioned below.

However, it should be noted that these are just policy proposals. The State of the Union is a forum for the President to address the nation to advocate for certain policies that they generally must pursue through legislation because federal tax policy is reserved to the Congress to delegate under Article I, Section 8 of the US Constitution. As such, the President cannot take unilateral action on the matter.

Extending the Premium Tax Credit

The President advocated for the extension of the expanded version of the premium tax credit, which is set to expire 1 December 2025. The premium tax credit is a refundable tax credit that can be claimed by low to moderate-income families and individuals that purchase insurance through the Health Insurance Marketplace. The expanded version of the credit currently in effect provides a higher credit and disregards income levels.

The credit was enacted through the Patient Protection and Affordable Care Act (ACA) (H.R. 3590), colloquially known as in the US and popular media as "Obamacare".

The premium tax credit is meant to help US taxpayers offset the cost of purchasing health insurance through the Health Insurance Marketplace, which is maintained by the US government but allows individuals to compare and purchase health insurance provided by private companies. The US healthcare industry is privatized, and individuals generally get health insurance through their employers and not the federal government.

The premium tax credit is a refundable credit that allows individuals who do not have employer-provided health insurance to purchase it on their own through the Marketplace and then apply the credit to their tax liability.

Corporate Minimum Tax

The President proposed an unexpected increase in the corporate minimum tax from 15% to 21%. The President's key piece of legislation, the Inflation Reduction Act (IRA), H.R. 5376, which was signed into law in 2022, set the corporate minimum tax at 15%.

The President commented that the current 15% rate is "still less than working people pay in federal taxes" and that the goal of a 21% rate is to ensure "every big corporation finally begins to pay their fair share".

Billionaire Tax

The President also seeks to enact a minimum tax for billionaires (i.e. a "billionaire tax") at a rate of 25%. This is a further increase from a previous proposal 20% that the White House published in a 2022 press release.

While the minimum rate of 25% would be imposed on the income of higher-income earners, the current proposal does not address the problem of billionaires who may not fit into the 25% bracket since their holdings are in unrealized gains. However, the President states that such a minimum tax "would raise USD 500 billion over the next 10 years".

Source: IBFD Tax Research Platform news