Biden introduces American Families Plan, Higher Taxes for Real Estate

On April 28 President Joe Biden unveiled his widely-anticipated American Families Plan, which would provide for $1.8 trillion in new spending on education, child care and paid family leave. This is the administration’s “soft” infrastructure proposal and follows last month’s American Jobs Plan, which calls for $1.9 trillion toward more traditional infrastructure, such as roads and bridges, but also includes disaster resiliency and high-speed broadband. 

To offset the cost of the new spending, Biden has proposed significant tax increases. The Jobs Plan includes raising the corporate tax rate from 21 to 28% and making changes to the taxation of U.S. multinational corporations. The Families Plan, however, includes many tax increases that would affect the retail real estate industry.

Overview of American Families Plan

Proposed spending:

• (est.) $400 billion to extend the child tax credit
• $225 billion to subsidize and improve childcare and boost pay for childcare workers
• $225 billion for a national paid family and medical leave program
• $200 billion for free universal preschool
• $109 billion for free community college
• $45 billion for childhood and school nutrition programs

Proposed Tax Increase:

• Repealing like-kind exchanges for gains greater than $500,000
• Treating carried interest, or the promote, as ordinary income
• Increasing the top tax rate on ordinary income to 39.6%
• Raising capital gains and dividends rate to 39.6% for households making over $1 million
• Eliminating stepped-up basis for inherited assets in excess of $1 million and taxing the gains if the property is not donated to charity. 
  • The plan promises “protections so that family-owned businesses will not have to pay taxes when given to heirs who continue to run the business.”
• Tightening rules that allow taxpayers making over $400K to avoid the 3.8% Medicare tax
• Permanently extending 2017 TCJA provision that restricts the deductibility of active pass-through business losses to $500K per couple.
• Funding for IRS audits of large businesses, estates, and higher-income individuals

The president’s plans are just the start of the legislative process, designed to fulfill many of his campaign promises to help families, improve infrastructure and make the tax code more fair. Speaker Nancy Pelosi is pushing to pass an infrastructure package through the House as early as July 4, but there will be many issues to resolve given the closely divided Congress and differences between the progressive and moderate wings on the Democratic caucus.

ICSC has already been educating members of Congress about the impact of these proposals via virtual meetings with legislators. Please be on the lookout for future emails about how you can take action.