Late last week, Senator Manchin (D-WV) released a July 28, 2021 document in which he offered to support a $1.5 trillion spending reconciliation package offset with associated tax increases. While the reduced scope of spending in comparison to the reported $3.5 trillion package currently under consideration in the House garnered most of the attention, tax policy observers are particularly interested in the tax increases endorsed by Senator Manchin and how they compare to the tax increases that recently passed the House Committee on Ways and Means (the House Package).

While Senator Manchin provided relatively few details regarding his tax increase proposals, he did lay out the following:

• Corporate tax rate of 25 percent
• Corporate "domestic minimum tax" of 15 percent 
• Top individual rate on ordinary income of 39.6 percent 
• Capital gains rate of 28 percent "all in" 
• "End[ing]" carried interest 

Although many similar elements appear in the House Package, there are important differences that will need to be reconciled in order to find a package that is capable of passing both the House and Senate.

With respect to the corporate rate, the House Package proposes a corporate rate of 26.5 percent, rather than 25 percent. The House package, however, does not contain a corporate minimum tax, which presumably Senator Manchin is basing on the 15 percent book income minimum tax proposed in the Administration's Greenbook.

The House Package and Senator Manchin appear to be in line with respect to individual taxation, as both propose a reinstatement of the pre-TCJA top individual rate of 39.6 percent, and the House Package's capital gains rate proposal of 25 percent combined with the 3.8 percent net investment income tax roughly equal the 28 percent "all in" capital gains rate proposed by Senator Manchin.

It is unclear whether Senator Manchin's proposal to "end carried interest" aligns with the House Package's proposal to extend the carried interest holding period from three years to five years, the more comprehensive proposal from the Administration's Greenbook, or Senator Wyden's proposal.

Finally, it is interesting to note that Senator Manchin has not made any international tax proposals, which stands in stark contrast to the significant outbound and inbound international proposals contained in the House Package.

While the status and timing of consideration of the reconciliation bill remain uncertain, the release of Senator Manchin's tax increase proposals provides an interesting perspective into how the House Package proposals may be modified in future negotiations in order to determine a package that can, in fact, be enacted into law. #TaxTake

Upcoming Speaking Engagements and Events

On October 7, Jorge will speak at the InvestmentNews RIA Summit on the panel, "What Can RIAs Expect from Washington?"

Marc will discuss the upcoming tax legislative agenda at the Savannah Estate Planning Council's 2021 Fall Meeting on October 21.

Marc will speak at the 56th Annual Southern Federal Virtual Tax Institute on a panel titled, "The 2021 Legislative Landscape: Evaluating Actual and Potential Changes," on October 25. 
 

The information contained in this communication is not intended as legal advice or as an opinion on specific facts. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. For more information, please contact one of the senders or your existing Miller & Chevalier lawyer contact. The invitation to contact the firm and its lawyers is not to be construed as a solicitation for legal work. Any new lawyer-client relationship will be confirmed in writing.

This, and related communications, are protected by copyright laws and treaties. You may make a single copy for personal use. You may make copies for others, but not for commercial purposes. If you give a copy to anyone else, it must be in its original, unmodified form, and must include all attributions of authorship, copyright notices, and republication notices. Except as described above, it is unlawful to copy, republish, redistribute, and/or alter this presentation without prior written consent of the copyright holder.