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Top Tax-Related Takeaways From Biden’s Budget Proposal



On March 9, 2023, President Biden released his official budget. As expected, his budget priorities include increasing taxes on corporations and high earners, boosting spending on policy items like energy and education, and moving to reduce the deficit.

Budget Proposals Are Not Law

But before you rush out and make plans based on the budget, you should understand that the President’s budget, like all others that came before it, is a proposal. It’s not law. It’s a signal to Congress that this is what the administration wants to happen—but Congress doesn’t always follow the wishes of the President. President Bush, for example, was never able to fully repealed the estate tax (it’s still around), President Obama did not “cut the deficit we inherited by half” by the end of his first term in office, and President Trump did not eliminate the Affordable Care Act.

(If you’d like to read more on this topic, The New York Times did an analysis of proposed budgets and fiscal realities from the last 30 years—with charts—here.)

But presidential budgets do set the tone for—and often the stage for political showdowns over—fiscal policy for the coming year. That’s why it’s worth noting, even if it isn’t the current rule of law.

Here’s a look at some key tax-related provisions included in President Biden’s recent budget proposal.



The proposal calls for an increase in the corporate income tax rate to 28%—higher than the current rate of 21% but lower than the pre-TCJA rate of 35%. For comparison, according to the Tax Foundation, the worldwide average statutory corporate income tax rate, measured across 180 jurisdictions, is 23.37%. When weighted by GDP, the average statutory rate is 25.43%. Under the OECD/G20 Inclusive Framework on BEPS (base erosion profit shifting), the global effective minimum tax rate will be 15%.

This would lead to additional changes, including the repeal of the base erosion and anti-abuse tax, known as BEAT. In its place, there would be an undertaxed payments rule, or UTPR, consistent with the model rules for OECD Pillar Two, which is part of the global tax deal and typically applies to high-earning companies. The UTPR would allow a country to increase the tax—sometimes called a top-up tax—on a multinational business that pays less than the proposed global minimum tax rate. The proposal makes clear, however, that US companies that benefit from US tax laws would continue to do so.

The proposal would also seek to increase the Global Intangible Low-Taxed Income—GILTI—tax rate on overseas income to 14% from the current 10.5%, calculated on a jurisdiction-by-jurisdiction basis.

The proposal would also boost the stock buyback surcharge signed into law under the Inflation Reduction Act from 1% to 4%. That should be no surprise, as it was mentioned as part of the State of the Union address. Corporate stock buybacks can be controversial since they tend to boost shareholder value rather than provide an incentive to re-invest in workers or technology. That’s true across party lines—in 2020, Donald Trump criticized companies that engaged in buybacks after a 2018 tax break and promised to prevent them from doing the same with Covid funds.

There are currently only a few tax incentives for US employers to bring offshore jobs and investments into the country. And, costs for offshoring US jobs are deductible. The proposal would create a new general business credit equal to 10% of the eligible expenses paid or incurred for onshoring a US trade or business. At the same time, the proposal would disallow deductions for expenses paid or incurred in connection with offshoring a US trade or business.

And citing “record profits in 2022,” the President’s budget would eliminate certain tax breaks for oil and gas company investments, including deductions tied to foreign production. Credit for enhanced oil recovery, oil and natural gas produced from marginal wells, and the expensing of intangible drilling costs are also on the chopping block.

High-Earning Individuals

The proposal would repeal the TCJA top tax rate cut for individuals, sending the rate back to 39.6% (it’s currently 37%).

The Net Investment Income Tax, or NIIT, sits at 3.8% and is imposed on certain kinds of passive income—typically investment income—of taxpayers with incomes of $200,000 or more for individuals ($250,000 for married couples filing jointly). The proposal would raise the NIIT rate to 5% for taxpayers making more than $400,000—at that threshold, the tax would also apply to other kinds of income, including pass-through income. The increased revenue would be directed into the Medicare Hospital Insurance trust fund.

The budget also proposes taxing capital gains at the ordinary income tax rates rather than favorable capital gains for taxpayers with more than $1 million in income.

The budget also calls for a so-called billionaire’s tax—a 25% minimum tax on the top 0.01% of taxpayers. As noted in my State of the Union cheat sheet, the name is a misnomer—the tax applies to total income, including unrealized capital gains income, for taxpayers with net wealth greater than $100 million.

The proposal would also seek to limit contributions to tax-favored retirement accounts, including IRAs, for single taxpayers with incomes over $400,000 ($450,000 for married taxpayers filing jointly). If that sounds familiar, it’s similar to the proposal in Build Better Back that was intended to eliminate the “Mega IRA.”

The “carried interest” loophole is also back in the public eye, and the President is seeking to close it. Under current law, certain investment managers can report part of their compensation as investment gains, which allows them to pay more favorable tax rates. The controversial tax break has been a target for years—President Trump had vowed to eliminate it in 2015, claiming that such managers were “getting away with murder” by not paying their fair share of taxes.

Another controversial tax break is also in the crosshairs again: like-kind exchanges. A like-kind or section 1031 exchange allows investors to delay paying capital gains on the sale of a property as long as the funds are used to immediately buy a similar property elsewhere. The break applies to properties used in a trade or business or for investment. Personal residences are treated differently—you can read about those here. The proposal would allow for a total like-kind deferral of gain up to $500,000 for single taxpayers ($1 million for married individuals filing jointly) each year. Gains over that amount would be taxed when the taxpayer transfers the property.


The proposal includes a ban on wash sales for cryptocurrency. Under current rules, taxpayers can’t claim a break if they sell securities for a loss and immediately repurchase them. But since cryptocurrency isn’t classified as a security, there’s no such wash-loss rule—that would change under the President’s budget.

Tax Credits

The budget calls for the re-expansion of the Child Tax Credit to the levels under the American Rescue Plan. That means the credit would grow from $2,000 per child to $3,000 per child for children six years old and above and to $3,600 per child for children under six through 2025—it would also be fully refundable permanently.

Also related to refundable credits? The proposal would make permanent the Earned Income Tax Credit (EITC) expansion for workers without children.

The budget would also make healthcare premium tax credits permanent and provide “Medicaid-like coverage” to taxpayers in states that didn’t okay Medicaid expansion.

Trusts and Estates

The proposal does not suggest an increase in tax rates or lower thresholds for the federal estate and gift tax. However, the budget proposes some significant changes to the way that taxpayers would treat assets—specifically those that have appreciated.

Under the proposal, the donor or deceased owner of an appreciated asset (like a stock that has grown in value) would realize capital gains at the time of the transfer. The growth would be taxable to the donor or the decedent’s estate, and capital losses and carry-forwards would apply. The resulting basis after the transfer would be the property’s fair market value at the time of the gift or the decedent’s death.

A $5 million per-donor exclusion would apply to property transferred by gift during life. This exclusion could be used by the decedent’s surviving spouse under the same portability rules for estate and gift tax purposes. Additionally, transfers to a US spouse or to charity would carry over the basis of the donor or decedent so that capital gains would not be realized until the surviving spouse disposes of the asset or dies.

Property held in trust would not be exempt under the proposal. Gain on unrealized appreciation also would be recognized by a trust, partnership, or other non-corporate entity that owns property if that property has not been the subject of a recognition event within the prior 90 years.


The Biden budget would increase discretionary spending for almost every government agency. Exceptions include Homeland Security, Transportation, and the Small Business Administration.

In particular, the IRS budget would see a 15% boost to $14.1 billion. That price tag includes $290 million for business systems modernization, which did not receive any annual funding in 2023.


According to the administration, the budget is fully paid for under the revenue provisions and would reduce deficits by $2.9 trillion over 10 years.

This is, of course, just a snapshot. There’s a lot more to dive into if you have interest.

  • You can read the official budget proposal here.
  • If you’d prefer a shorter format, the fact sheet is here.
  • And if you want specific information about some of the proposals, you can read Treasury’s General Explanations here.


Bonds See 2023 Recession, Stocks Aren’t So Sure



The yield curve is one of the most robust recession predictors and has signaled a recession may be coming since mid 2022. In contrast, U.S. stocks as measured by the S&P 500 are up materially from the lows of last October and only just below year-to-date highs, seemingly rejecting recession fears. Yet, fixed income markets see the Fed potentially cutting rates by the summer, perhaps reacting to a U.S. recession.

The Evidence From The Bond Markets

The recessionary evidence, at least from fixed income markets, is mounting. The 10 yield Treasury yield has been below the 2 year yield consistently since last July. That is is called an inverted yield curve and has signaled a recession fairly reliably when compared to other leading indicators.

Building on that, fixed income markets see almost a nine in ten chance that the Federal Reserve cuts rates by September of this year. That’s something the Fed has repeatedly said they won’t do on their current forecasts. Yet, a recession could cause it to happen.

The Stock Market

In contrast, the stock market shows some optimism. The S&P 500 is up 7% year-to-date as the market has shrugged off fears of contagion from recent banking issues. In particular, tech stocks have rallied.

In contrast, more defensive sectors such as healthcare, utilities and consumer goods have lagged in 2023. This suggests that the stock market is taking more of a ‘risk on’ position and is perhaps less worried about the economy.


That said the stock market is a leading indicator of the business cycle, it may be that stocks see a recession, but are now looking past it to growth ahead and are factoring in the lower discount rates that a recession might bring as interest rates decline. Also, the U.S. stock market is relatively global, so the fate of the U.S. economy is a key factor in driving profits, but not the only one.

What’s Next?

Monitoring unemployment data will be key. Though the yield curve is a good long-term forecaster of recessions it is less precise in signaling when a recession starts. Unemployment rates can offer more accurate recession timing. Unemployment edged up in February, suggesting a recession may be near, but we’ve also seen monthly noise unemployment. Two similar monthly unemployment spikes during 2022 both proved false alarms.

However, if we see a sustained move up in unemployment from the low levels of 2022 that may be a relatively clear sign that a recession is here. Economist Claudia Sahm estimates that a sustained 0.5% increase in unemployment rate from 12-month lows is sufficient to trigger a recession. Unemployment rose 0.2% from January to February 2023, so maybe we’re on the way there. Of course, the jobs market performed better than expected in 2022 and it could do so again. Still, fixed income markets do suggest a 2023 recession is coming. Stock markets don’t necessarily share that view.

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Which States Have The Highest And Lowest Life Expectancies?



There’s a wide variance of life expectancies among the 50 states in the U.S., according to a recent report prepared by Assurance, an insurance technology platform that helps consumers with decisions related to insurance and financial well-being.

Figure 1 below shows the 10 states with the highest life expectancy, starting with Hawaii, the state with the highest life expectancy.

Figure 2 below shows the 10 states with the lowest life expectancy, starting with Mississippi, the state with the lowest life expectancy.

Assurance scoured life expectancy data prepared in January 2023 by the U.S. Centers for Disease Control and Prevention (CDC). With this data, Assurance created several easy-to-understand graphics that offer information about life expectancies.

Life expectancies are a basic measure of well-being

As measured by the CDC, life expectancies are a basic measurement of well-being in a broad population and not a prediction of how long an individual might live. The CDC measures the expected lifespan for a person born in the year of measurement. This measurement is calculated based on the assumption that the individual will live and die according to the rates of death that are prevalent in the measurement year for each age. There’s no assumed improvement or backsliding in the assumed mortality rates in future years for each age in the life expectancy calculation.


By contrast, an estimated lifespan for an individual would consider their current age, their gender, and some basic lifestyle information. It might also attempt to project future improvements or backsliding in mortality rates based on key factors.

Significant influences on life expectancy calculations

Leading causes of death in the U.S. are heart disease, cancer, and accidents in that order. These immediate causes are significantly influenced by factors in the population such as poverty rates, educational attainment, rates of obesity and smoking, access to healthcare, prevalence of violent crime, and the support people receive from federal, state, and local governments. All these factors can vary widely among different states, which can be a key reason why life expectancies vary by state.

When you think about it, all these factors also have the potential to influence a person’s quality of life. The measured life expectancy rate rolls up all these factors into one objective measurement of well-being that’s based on population data.

In addition to the factors listed above, mortality rates increased and life expectancies decreased in the past few years due to the Covid-19 pandemic. A recent article titled “Live Free And Die” summarized recent research results that show that life expectancies in most countries around the world rebounded after the Covid-19 pandemic but that they continued to decline in the United States. Many of the reasons cited in the article for the continued decline in U.S. life expectancies are the same or similar to the factors listed above.

NPR‘Live free and die?’ The sad state of U.S. life expectancy

Why should retirees care about the life expectancies reported here if these measures don’t predict your own lifespan? Life expectancy calculations indicate the general well-being of the entire population in your area. While the living conditions in your area can influence your own lifespan and quality of life, retirees should focus on their remaining life expectancy given their age. They should also consider how the factors listed above that influence life expectancies in the population might apply to them.

You can obtain customized estimates of your remaining life expectancy at the Actuaries Longevity Illustrator. Part of your planning for retirement is understanding how long you an an individual might live, instead of relying on generalized information about larger populations you see in the media.

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IRS Dirty Dozen Campaign Warns Taxpayers To Avoid Offer In Compromise ‘Mills’



Owing taxes can be stressful. Unfortunately, the actions of some companies can make it worse. As part of its “Dirty Dozen” campaign, the IRS has renewed a warning about so-called Offer in Compromise “mills” that often mislead taxpayers into believing they can settle a tax debt for pennies on the dollar—while the companies collective excessive fees.

Dirty Dozen

The “Dirty Dozen” is an annual list of common scams taxpayers may encounter. Many of these schemes peak during tax filing season as people prepare their returns or hire someone to help with their taxes. The schemes put taxpayers and tax professionals at risk of losing money, personal information, data, and more.

(You can read about other schemes on the list this year—including aggressive ERC grabs here, phishing/smishing scams here and charitable ploys here.)

Tax Debt Resolution Schemes

“Too often, we see some unscrupulous promoters mislead taxpayers into thinking they can magically get rid of a tax debt,” said IRS Commissioner Danny Werfel.

“This is a legitimate IRS program, but there are specific requirements for people to qualify. People desperate for help can make a costly mistake if they clearly don’t qualify for the program. Before using an aggressive promoter, we encourage people to review readily available IRS resources to help resolve a tax debt on their own without facing hefty fees.”


Offers In Compromise

Legitimate is a key word. Offers in Compromise are an important program to help people who can’t pay to settle their federal tax debts. But, as the IRS notes, these “mills” can aggressively promote Offers in Compromise—OIC—in misleading ways to people who don’t meet the qualifications, frequently costing taxpayers thousands of dollars.

An OIC allows you to resolve your tax obligations for less than the total amount you owe. You generally submit an OIC because you don’t believe you owe the tax, you can’t pay the tax, or
 exceptional circumstances exist.

Because of the nature of the OIC—and the dollars involved—the process can be time-consuming. It can also be confusing for taxpayers who may not have a complete grasp on their finances.

First, you must complete a detailed application, Form 656, Offer in Compromise. You must also submit Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, or Form 433-B, Collection Information Statement for Businesses, with supporting documentation (generally, bank and brokerage statements and proof of expenses).

You’ll also need to submit a non-refundable fee of $205 and payment made in good faith. The payment is typically 20% of the offer amount for a lump sum cash offer or the first month’s payment for those made over time. Generally, initial payments will not be returned but will be applied to your tax debt if your offer is not accepted. Payments and fees may be waived if the OIC is submitted based solely on the premise that you do not owe the tax or if your total monthly income falls at or below income levels based on the Department of Health and Human Services (DHSS) poverty guidelines.

The IRS will examine your application and decide whether to accept it based on many things, including the total amount due and the time remaining to collect under the statute of limitations. The IRS will also review your income—including future earnings and accounts receivables—and your reasonable expenses, as determined by their formula. The IRS will also consider the amount of equity you have in assets that you own—this would include real property, personal property (like automobiles), and bank accounts.


Before your offer can be considered, you must be compliant. That means you must have filed all your tax returns and paid off any liabilities not subject to the OIC. After you submit your offer, you must continue to timely file your tax returns, and pay all required tax, including estimated tax payments. If you don’t, the IRS will return your offer.

Additionally, you cannot currently be in an open bankruptcy proceeding, and you must resolve any open audit or outstanding innocent spouse claim issues before you submit an offer.


You can probably tell—it’s a lot to consider. You may want representation. A tax professional can help marshal you through the process and offer practical guidance, while communicating what fees could look like.

By contrast, according to the IRS, an OIC “mill” will usually make outlandish claims, frequently in radio and TV ads, about how they can settle a person’s tax debt for cheap. Also telling: the fees tend to be significant in exchange for very little work.

Those mills also knowingly advise indebted taxpayers to file an OIC application even though the promoters know the person will not qualify, costing taxpayers money and time. You can check your eligibility for free using the IRS’s Offer in Compromise Pre-Qualifier tool.

“Pennies On A Dollar”

What about those promises that taxpayers can routinely settle for pennies on a dollar? Not true. Generally, the IRS will not accept an offer if they believe you can pay your tax debt in full through an installment agreement or equity in assets, including your home. That’s why the IRS tends to reject a majority of OICs that are submitted. The acceptance rate is less than 1 in 3, according to the 2021 Data Book.

The IRS will generally approve an OIC when the amount offered represents the best opportunity for the IRS to collect the debt. It’s true that there’s a formula that the IRS uses to figure out how much they think they can collect from you. But there is some wiggle room to account for special circumstances, including a loss of income or a medical condition. It’s worth noting those are the exceptions, not the rule.


While submitting an OIC may keep the IRS from calling you, it doesn’t stop all collections activities—don’t believe companies that suggest that submitting an OIC will make your tax debt disappear. Penalties and interest will continue to accrue on your outstanding tax liability. Additionally, the IRS may keep your tax refund, including interest, through the date the IRS accepts your OIC.

You may also be liened. In most cases, the IRS will file a Notice of Federal Tax Lien to protect their interests, and the lien will generally stay in place until your tax obligation is satisfied.

Be Skeptical

An OIC is a serious effort to resolve tax debt and shouldn’t be taken lightly. Be skeptical—if it sounds too good to be true, it likely is. If you’re considering an OIC, hire a competent tax professional who understands the rules and is willing to level with you about your chances of being successful—including other options. Don’t fall into a trap that can make your situation worse.

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