The Tax Law Is Changing
President Biden’s Fiscal Year 2023 Budget includes several tax law changes. These changes include an increase in both personal and corporate tax rates.
Increase In the Corporate Income Tax Rate
· Current Law
o Under the Tax Cuts and Jobs Act of 2017, the graduated tax schedule was replaced with a flat tax.
o Most corporate income was taxed at a marginal and average rate of 35 percent.
o After the TCJA, that tax was reduced to 21 percent for all C corporations.
· Reason for Change
o To raise revenue to pay for infrastructure and longstanding fiscal priorities.
o To expand the progressive tax system and reduce income inequality.
o To recapture money from multinational corporations by raising the Global Intangible Low Taxed Income (GILTI) for those who move profits and activity offshore to avoid higher domestic tax rates.
o The proposal under the Biden administration raises that rate to 28 percent.
o Raise GILTI to 20 percent, applied on a jurisdictional basis.
o Would begin for tax years after December 31, 2022, for most applications.
For those with taxable years ending after December 31, 2022, the corporate tax rate would be 21 percent plus 7 percent multiplied by the portion of the taxable year in 2023.