President Biden on Friday unveiled a $6 trillion budget proposal for next year that includes a bevy of new taxes on wealthy Americans and big corporations but keeps in place a Trump-era tax break for owners of closely held businesses.
Although Biden campaigned on repealing the break, included as part of the 2017 Tax Cuts and Jobs Act, pass-through businesses, such as sole proprietors, partnerships and S-corporations, will still be able to deduct up to 20% from their pre-tax income.
The deduction, officially known as the qualified business income deduction, disproportionately benefits wealthy Americans: An analysis by the Joint Committee on Taxation found that individuals making $1 million or more reaped about $17.8 billion of the total $40.2 billion benefits of the law in 2018, or roughly 44.3%. Business owners earning more than $500,000 received $3.6 billion. By 2024, the benefits of the law will become even more skewed, with owners earning more than $1 million getting $31.6 billion and those making $500,000 getting $5.3 billion in tax benefits.
For 2021, single filers earning less than $164,900 and married couples making below $329,800 may qualify for the full 20% deduction. Still, there are some limits on who can take advantage of the deduction. For instance, some specified services and trades, like those working in health or financial services, aren't eligible at certain income levels.
Before Republicans passed the tax overhaul, such companies could be taxed as much as 39.6%.
The Biden administration has not explained why it's leaving the tax preferences untouched, and a White House spokesperson did not immediately respond to a FOX Business request for comment.
Instead, Biden is pushing to raise the corporate tax rate to 28% from 21%, nearly double the capital gains tax rate paid by wealthy Americans, restore the top individual income tax rate to 39.6% and impose a global minimum on U.S. companies foreign profits as part of his two-pronged economic agenda.
"Now is the time to build the foundation that we’ve laid, to make bold investments in our families, in our communities, in our nation," Biden said in Cleveland on Thursday. "We know from history that these kinds of investments raise both the floor and the ceiling of an economy for everybody."
The tax increases would be used to fund Biden's sprawling economic agenda, including the $2.3 trillion American Jobs Plan and the $1.8 trillion American Families Plan, as well as his $1.5 trillion request for annual operating expenditures. By 2024, the proposal, if passed, will push debt levels held by the public to the highest levels since World War II.
Under the plan, the deficit would hit $1.8 trillion in 2022 and would routinely run above $1.3 trillion over the next decade, despite nearly $3 trillion in proposed tax increases. The gap between what the government spends and what it collects in revenue would grow to nearly $1.6 trillion by 2031.