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Preliminary estimates show Build Back Better legislation will reduce deficits



This news story was published on November 4, 2021.
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By: Lily Batchelder, Assistant Secretary for Tax Policy

President Joe Biden

The Build Back Better invests meaningfully in American families and workers, while laying the foundation for meeting imperative climate goals. When the President released the Build Back Better framework last week, he proposed $2 trillion in savings that would more than pay for the critical investments in the legislation – and in fact generate net deficit reduction.  With the release of the text of the Build Back Better Act in the House and scoring from the Joint Committee on Taxation, we can update the estimate of fiscal savings.

The legislation would, as the President proposed, generate more than $2 trillion in savings. These savings come from ensuring large multinational corporations and wealthy Americans pay their fair share and reducing the cost of prescription drugs. These provisions will not raise taxes on any taxpayer making less than $400,000.

The table below includes the latest estimates by the Joint Committee on Taxation, Congressional Budget Office, and the Treasury Department of the revenue raising provisions in the bill. The bottom line is that the Build Back Better Act under consideration in the House of Representatives will be fully paid for and reduce the deficit.

At the crux of reforms to the tax code is a historic overhaul of the international tax regime, whose global adoption has been successfully negotiated with 136 countries representing nearly 95% of the world’s economy. As a result of these changes, the ability of large corporations to shift profits abroad will be substantially limited, and the race to the bottom in corporate taxation will no longer be a driving force weakening capital taxation. The Build Back Better Act adopts the agreed-upon 15% country-by-country minimum tax on the foreign profits of U.S. multinational corporations and includes strong incentives for any hold-out countries to join the agreement through a separate tax on companies based in such hold-out jurisdictions. Together with other international and business tax reforms and loophole closers, these provisions are estimated to generate over $350 billion in additional U.S. tax revenue.  

The Act further ensures that large, profitable corporations will pay a minimum amount of tax by imposing a 15% minimum tax on companies that report over $1 billion in profits to their shareholders. Less than 0.00075% of U.S. businesses will owe this tax in a given year, which will raise more than $300 billion over the course of the next decade.

Over $200 billion is generated from a surtax on multi-millionaires (the top 0.02% of taxpayers making $10 million or more annually), and about $400 billion comes from closing loopholes that allow some wealthy taxpayers to avoid paying Medicare taxes on their earnings and permit well-off taxpayers to offset ordinary income with business losses.

The largest pay-for in the bill is not a tax increase at all. By collecting taxes that are already owed—and disproportionately unpaid by the highest-earners—the Build Back Better Act will generate at least $400 billion in additional revenue. Over the last decade, an under-resourced IRS has been unable to appropriately focus attention on top earners who are most responsible for the tax gap. Indeed, audit rates decreased more over that period for high earners than for Earned Income Tax Credit recipients. This additional revenue will result from providing the IRS with much-needed resources to pursue wealthy tax evaders, modernize outdated technological infrastructure, and provide meaningful taxpayer services.

Even beyond their sizable revenue-raising potential, these collective policies make the American economy more competitive by reducing profit shifting, ending a corporate tax race to the bottom, and overhauling a two-tiered system of tax administration—where American workers pay what they owe, but the wealthiest often do not.

These are historic policy achievements in and of themselves—and they also pay for transformational investments that will improve the lives of American workers, our children, and the generations that will follow.    

 

Revenue Raisers in Build Back Better Act

  Revenue

(in billions)

 

International and Other Business Reforms

 

$371

15% Minimum Tax on the Largest Corporations $319
AGI Surtax for Multi-Millionaires $228
Medicare Tax Loophole for High Earners $252
Limit Business Losses for High Earners $160
Stock Buybacks $124
IRS Investments in Compliance, IT, and Taxpayer Services* $400
Reduce the Cost of Prescription Drugs** ~$250
Other Provisions $47
 

Total

 

~$2,151

 

Unless otherwise noted, all estimates are from the Joint Committee on Taxation.

* Source: U.S. Department of the Treasury.

** Source: The framework released by the White House last week proposed repealing the prescription drug rebate rule as negotiations continued on prescription drug reform. Based on the Congressional Budget Office, adjusted downward for reforms in bipartisan infrastructure framework, this would have saved about $150 billion. Other components of the Administration estimate the deal reached on prescription drug reform announced this week, which includes additional reforms, will generate about an additional $100 billion in savings, based on Congressional Budget Office estimates of prescription drug negotiations in previous legislation. A more precise CBO estimate will be available in the future.

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16 Responses to Preliminary estimates show Build Back Better legislation will reduce deficits

  1. Anonymous Reply Report comment

    November 7, 2021 at 6:07 am

    It all makes sense to those sheep being driven down that beautiful road to HELL paved with good intentions.

  2. Anonymous Reply Report comment

    November 6, 2021 at 8:41 am

    I love it that all you guys who can’t balance a check book weigh in on how crazy it is when someone who actually studied finance and data produces something that goes against your train of thought. You are all freakin morons.

    • Anonymous Reply Report comment

      November 6, 2021 at 8:58 am

      believe they studied Marxist bankruptcy

    • Anonymous Reply Report comment

      November 7, 2021 at 12:43 pm

      One of the most dangerous myths that has infected the current debate over the direction of tax policy is the oft repeated claim that the tax increases under President Bill Clinton led to the boom of the 1990s.

      While this myth is now a central part of liberal Democratic folklore, it is contradicted by the political disaster and poor economic results that followed the tax increase. The real lesson of the Clinton Presidency is the way back to prosperity lies not through increased taxes on “the rich,” but through tax and regulatory reform and a return to a rules based monetary policy that produces a strong and stable dollar.

      The 1993 Clinton tax increase raised the top two income tax rates to 36% and 39.6%, with the top rate hitting joint returns with incomes above $250,000 ($400,000 in 2012 dollars). In addition, it removed the cap on the 2.9% Medicare payroll tax, raised the corporate tax rate to 35% from 34%, increased the taxable portion of Social Security benefits, and imposed a 4.3 cent per gallon increase in transportation fuel taxes.

      Second, Messrs. Carville and Greenberg are contradicted by their former boss. Speaking at a fund raiser in 1995, President Clinton said: “Probably there are people in this room still mad at me at that budget because you think I raised your taxes too much. It might surprise you to know that I think I raised them too much, too.”

      • Anonymous Reply Report comment

        November 7, 2021 at 12:45 pm

        However, with his masterful 1995 flip-flop on taxes, President Clinton took the first step toward a successful campaign for re-election and a shift in policy that produced the economic boom that occurred during his second term.

        In 1997, Clinton signed a reduction in the (audible liberal gasp) capital gains tax rate to 20% from 28%.

        The 1997 tax cuts also included a phased in increase in the death tax exemption to $1 million from $600,000, and established Roth IRAs and increased the limits for deductible IRAs.

        Annual growth in federal spending was kept to below 3%

        The Clinton Administration also maintained its policy of a strong and stable dollar. Over his entire second term, consumer price inflation averaged only 2.4% a year.

        It was a prosperity produced by freeing America’s poor from a punitive welfare system, lowering tariffs, reducing tax rates on the creators of wealth, limiting the growth of federal government expenditures, and providing a strong and stable dollar to businesses and families in America and throughout the world.

        A shared prosperity can be achieved again. But to do so, the American people will have to overcome the envy feeding myth perpetrated by President Barack Obama(this could be changed to Biden, and the article except dollar amounts, would stand true.) and the spin-masters and leadership of the Democratic Party that raising tax rates on high incomes will somehow lead to more job creation, more opportunity and increased prosperity and security for the middle-class.

        https://www.forbes.com/sites/charleskadlec/2012/07/16/the-dangerous-myth-about-the-bill-clinton-tax-increase/?sh=2f6c5ac66e8a

  3. Anonymous Reply Report comment

    November 6, 2021 at 2:00 am

    It’s cover for those 13 RINOS that voted for this crap. They must be thrown out with the rest of the Marxist fools.

  4. John Reply Report comment

    November 5, 2021 at 4:24 pm

    And pigs fly, that makes about as much sense as this article.

  5. Anonymous Reply Report comment

    November 5, 2021 at 2:08 pm

    What moron wrote this article. Go back to school idiot. Clearly you blew your way to passing grades.

  6. Anonymous Reply Report comment

    November 5, 2021 at 12:32 pm

    Leave it alone …. if you voted for democrats… just leave, don’t admit it … just leave that crap. Otherwise people will think you either suck on the teet of government or are mentally challenged. Please just leave before you embarrass yourself further.

  7. Anonymous Reply Report comment

    November 5, 2021 at 6:09 am

    LETS GO BRANDON !

  8. Anonymous Reply Report comment

    November 5, 2021 at 6:01 am

    There is a reason in places like Detroit the literacy rate is 50 %. It’s easier to control these idiots to vote for Marxism.

  9. Anonymous Reply Report comment

    November 5, 2021 at 5:58 am

    In Biden’s DEPENDS … POOPEY PANTS JOE

  10. Anonymous Reply Report comment

    November 5, 2021 at 5:57 am

    What idiots :… reduce the deficit hahaha
    EVERYTHING that these MARXIST fools touch turns to shit.

    • Anonymous Reply Report comment

      November 5, 2021 at 11:45 am

      Dems are the only party to reduce the deficit in the last 50 years. Repubs raise every frickin’ time they get in the WH.

  11. Anonymous Reply Report comment

    November 4, 2021 at 7:25 pm

    Talkin about his depends…

    • Anonymous Reply Report comment

      November 4, 2021 at 9:08 pm

      He looks like he hopes to poop today.