The White House has released a slimmed-down version of its Social Policy and Climate Framework, which totals out to $1.85 trillion in spending. This new re-vamped plan comes in light of heavy negotiations surrounding the passage of bills, as Democrats also hope to pass a parallel $1 trillion infrastructure bill.
Why the Budget Cuts?
To combat this Democrats made changes to the tax on high-income earners, applying a 5% surtax on Adjusted Gross Incomes over $10 million and another 3% on AGI over $25 million. These taxes would effectively raise the top tax rate on ordinary income to at least 45% and increase the top capital-gains tax rate to 31.8%. Additionally, it would also apply a 3.8% investment income tax to active business income, which is poised to hit high-income owners of closely-held businesses.
New Break Down of Spending
- $555 Billion – Clean Energy and Climate Investments
- $400 Billion – Child Care and Preschool
- $200 Billion – Child Tax & Earned Income Credits
- $150 Billion – Home Care
- $150 Billion – Housing
- $130 Billion – ACA Credits Including in Uncovered States
- $100 Billion – Immigration
- $90 Billion – Equity and Other Investments
- $40 Billion – Higher Education & Work Force
- $35 Billion – Medicare
Specific Spending Policies
Included in this spending is a one-year extension on the expanded child tax credit through 2022, as well as including a provision allowing for the credit to be permanently available for low-income families who do not pay income taxes. It also will help fund 6 years’ worth of universal pre-kindergarten classes, 6 years of child-care subsidies, as well as $150 billion to help support long-term care for elderly and disabled Americans. The climate-related spending will include $320 billion to support expanded tax credits for residential and utility-scale renewable energy, electric vehicles, and clean energy production over a 10-year span.
These are just some of the highlights of the planned spending, for a more detailed breakdown, please see the White House’s release of its Build Back Better Framework, and as always – give us a call at 516-541-6549 with any questions or comments on this!