International Tax Reform and the Biden-Harris Tax Pledge

Abstract

In late 2021, the House passed landmark tax reform legislation in the Build Back Better Act. Treasury later released the green book, which layers in additional tax reform proposals from the Biden administration.

The domestic tax reform proposals are generally consistent with President Biden’s and Vice President Kamala Harris’s pledge to not raise taxes on individuals or families who make $400,000 or less per year. However, the drafters of the international tax reform proposals may have unintentionally overlooked whether their reforms would increase the net U.S. federal income tax liability of any individual or family with taxable income of up to $400,000 per year, such as those who are individual U.S. shareholders of a controlled foreign corporation or people claiming foreign tax credits.

The international tax reforms can affect almost nine million Americans living abroad. Also, millions of others have foreign income and FTC from foreign businesses owned directly or through family partnerships, publicly traded partnerships, or private funds. An  accredited investor in a private fund is required to have only $200,000 of annual income, which can be even lower in some cases. The international tax reform proposals that violate the Biden tax pledge should be fixed.