Income Tax

More stories

  • 100 Shares99 Views

    in Economy

    Who Qualifies For Biden’s Student Loan Forgiveness Plan

    by

    President Biden’s move means the student loan balances of millions of people could fall by as much as $20,000. This F.A.Q. explains how it will work.President Biden announced on Wednesday that the federal government would cancel up to $20,000 worth of federal student loans for millions of people. But not everyone with debt will qualify.The action includes rules that will maintain the balances of debtors who currently have high incomes. Those who do qualify will need to navigate the balky federal loan servicing system and keep a close eye on their accounts and credit reports for any mistakes.It also extends the pause on monthly student loan payments, which means that borrowers won’t have to resume payments until at least January, and provides details on a new proposal to create a more affordable income-driven repayment plan.What follows are questions you may have about the cancellation program with answers that have come from the White House, the Department of Education and student loan servicers.We will update this article in the coming days and weeks as more details become available.Who qualifies for loan cancellation?Individuals who are single and earn under $125,000 will qualify for the $10,000 in debt cancellation. If you’re married and file your taxes jointly or are a head of household, you qualify if your income is under $250,000.Eligibility will be based on your adjusted gross income. Income figures from either 2020 or 2021 can render you eligible, but 2022 income will not.If you received a Pell Grant and meet these income requirements, you could qualify for an extra $10,000 in cancellation.Loans obtained after June 30 are not eligible for relief.Which types of debt qualify?Only federal student loan debt is eligible. This includes PLUS loans, whether parents or graduate students took them out.Private loans are not eligible. Neither are many so-called F.F.E.L. loans, which stand for Federal Family Education Loan. If your F.F.E.L. loan was not eligible for the payment pause that began in 2020, it will not be eligible for the new cancellation.I didn’t finish my degree. Does that disqualify me?No.President Biden, speaking at Morehouse College and Clark Atlanta University, is also giving those who received Pell Grants the possibility of qualifying for another $10,000 in loan cancellation.Doug Mills/The New York TimesWhat’s the first thing I need to do if I qualify?Start by making sure that your loan servicer knows how to find you, so that you’ll be able to receive any guidance it provides and follow any instructions that it issues. Check that your postal address, your email address and your mobile phone number are listed accurately.If you don’t know who your servicer is, consult the Department of Education’s “Who is my loan servicer?” web page for instructions.Will the $10,000 in cancellation happen automatically, or do I need to submit a tax return or do something else to prove that I qualify?It depends. If you’re already enrolled in some kind of income-driven repayment plan and have submitted your most recent tax return to certify that income, your servicer and the Education Department know how much you earn and you should not need to do anything else. Still, keep an eye out for guidance from your servicer.What to Know About Student Loan Debt ReliefCard 1 of 5What to Know About Student Loan Debt ReliefMany will benefit. More

  • 100 Shares199 Views

    in Economy

    The Carried Interest Loophole Survives Another Political Battle

    by

    The latest effort to narrow the preferential tax treatment used by private equity executives failed after Senator Kyrsten Sinema objected.WASHINGTON — Once again, carried interest carried the day.The last-minute removal by Senate Democrats of a provision in the climate and tax legislation that would narrow what is often referred to as the “carried interest loophole” represents the latest win for the private equity and hedge fund industries. For years, those businesses have successfully lobbied to kill bills that aimed to end or limit a quirk in the tax code that allows executives to pay lower tax rates than many of their salaried employees.In recent weeks, it appeared that the benefit could be scaled back, but a last-minute intervention by Senator Kyrsten Sinema, the Arizona Democrat, eliminated what would have been a $14 billion tax increase targeting private equity.Lawmakers’ inability to address a tax break that Democrats and some Republicans have called unfair underscores the influence of lobbyists for the finance industry and how difficult it can be to change the tax code.In addition to doing away with the carried interest provision, the deal Democratic leaders cut with Ms. Sinema included a 1 percent excise tax on stock buybacks and changes to a minimum corporate tax of 15 percent that favored manufacturers.On Friday, the private equity and hedge fund industries applauded the development, describing it as a win for small business.“The private equity industry directly employs over 11 million Americans, fuels thousands of small businesses and delivers the strongest returns for pensions,” said Drew Maloney, the chief executive of the American Investment Council, a lobbying group. “We encourage Congress to continue to support private capital investment in every state across our country.”Bryan Corbett, the chief executive of the Managed Funds Association, said: “We’re happy to see that there is bipartisan recognition of the role that private capital plays in growing businesses and the economy.”Carried interest is the percentage of an investment’s gains that a private equity partner or hedge fund manager takes as compensation. At most private equity firms and hedge funds, the share of profits paid to managers is about 20 percent.Under existing law, that money is taxed at a capital-gains rate of 20 percent for top earners. That’s about half the rate of the top individual income tax bracket, which is 37 percent. A tax law passed by Republicans in 2017 largely left the treatment of carried interest intact, after an intense lobbying campaign, but it did narrow the exemption by requiring executives to hold their investments for at least three years in order to enjoy preferential tax treatment.An agreement reached last week by Senator Joe Manchin III, Democrat of West Virginia, and Senator Chuck Schumer of New York, the majority leader, would have extended that holding period to five years from three, while changing the way the period is calculated in hopes of reducing taxpayers’ ability to take advantage of the lower 20 percent tax rate.What’s in the Democrats’ Climate and Tax BillCard 1 of 6A new proposal. More

  • 150 Shares189 Views

    in Economy

    Carried Interest Is Back in the Headlines. Why It’s Not Going Away.

    by

    Changes demanded by Senator Kyrsten Sinema will preserve a tax loophole that Democrats have complained about for years.For years, Democrats and even some Republicans such as former President Donald J. Trump have called for closing the so-called carried interest loophole that allows wealthy hedge fund managers and private equity executives to pay lower tax rates than entry-level employees.Those efforts have always failed to make a big dent in the loophole — and the latest proposal to do so also faltered this week. Senate leaders announced on Thursday that they had agreed to drop a modest change to the tax provision in order to secure the vote of Senator Kyrsten Sinema, Democrat of Arizona, and ensure passage of their Inflation Reduction Act, a wide-ranging climate, health care and tax bill.An agreement reached last week between Senator Chuck Schumer, the majority leader, and Senator Joe Manchin III, Democrat of West Virginia, would have taken a small step in the direction of narrowing carried interest tax treatment. However, it would not have eliminated the loophole entirely and could still have allowed rich business executives to have smaller tax bills than their secretaries, a criticism lobbed by the investor Warren E. Buffett, who has long argued against the preferential tax treatment.The fate of the provision was always in doubt given the Democrats’ slim control of the Senate. And Ms. Sinema had previously opposed a carried interest measure in a much larger bill called Build Back Better, which never secured the 50 Senate votes needed — Republicans have been unified in their opposition to any tax increases.Had the legislation passed in the form that Mr. Schumer and Mr. Manchin presented it last week, the shrinking of the carried interest exception would have brought Democrats a tiny bit closer to realizing their vision of making the tax code more progressive.What is carried interest?Carried interest is the percentage of an investment’s gains that a private equity partner or hedge fund manager takes as compensation. At most private equity firms and hedge funds, the share of profits paid to managers is about 20 percent.Under existing law, that money is taxed at a capital-gains rate of 20 percent for top earners. That’s about half the rate of the top individual income tax bracket, which is 37 percent.The 2017 tax law passed by Republicans largely left the treatment of carried interest intact, after an intense business lobbying campaign, but did narrow the exemption by requiring private equity officials to hold their investments for at least three years before reaping preferential tax treatment on their carried interest income.What would the Manchin-Schumer agreement have done?The agreement between Mr. Manchin and Mr. Schumer would have further narrowed the exemption, in several ways. It would have extended that holding period to five years from three, while changing the way the period is calculated in hopes of reducing taxpayers’ ability to game the system and pay the lower 20 percent tax rate.Senate Democrats say the changes would have raised an estimated $14 billion over a decade, by forcing more income to be taxed at higher individual income tax rates — and less at the preferential rate.The longer holding period would have applied only to those who made $400,000 per year or more, in keeping with President Biden’s pledge not to raise taxes on those earning less than that amount.The tax provision echoed a measure that was initially included in the climate and tax bill that House Democrats passed last year but that stalled in the Senate. The carried interest language was removed amid concern that Ms. Sinema, who opposed the measure, would block the overall legislation.Why hasn’t the loophole been closed by now?Many Democrats have tried for years to completely eliminate the tax benefits private equity partners enjoy. Democrats have sought to redefine the management fees they get from partnerships as “gross income,” just like any other kind of income, and to treat capital gains from partners’ investments as ordinary income.Such a move was included in legislation proposed by House Democrats in 2015. The legislation would also have increased the penalties on investors who did not properly apply the proposed changes to their own tax filings.The private equity industry has fought back hard, rejecting outright the basic concepts on which the proposed changes were based.“No such loophole exists,” Steven B. Klinsky, the founder and chief executive of the private equity firm New Mountain Capital, wrote in an opinion article published in The New York Times in 2016. Mr. Klinsky said that when other taxes, including those levied by New York City and the state government, were accounted for, his effective tax rate was between 40 and 50 percent.What would the change have meant for private equity?The private equity industry has defended the tax treatment of carried interest, arguing that it creates incentives for entrepreneurship, healthy risk-taking and investment.The American Investment Council, a lobbying group for the private equity industry, described the proposal as a blow to small business.“Over 74 percent of private equity investment went to small businesses last year,” said Drew Maloney, chief executive of the council. “As small-business owners face rising costs and our economy faces serious headwinds, Washington should not move forward with a new tax on the private capital that is helping local employers survive and grow.”The Managed Funds Association said the changes to the tax code would hurt those who invested on behalf of pension funds and university endowments.“Current law recognizes the importance of long-term investment, but this proposal would punish entrepreneurs in investment partnerships by not affording them the benefit of long-term capital gains treatment,” said Bryan Corbett, the chief executive of the association.“It is crucial Congress avoids proposals that harm the ability of pensions, foundations and endowments to benefit from high-value, long-term investments that create opportunity for millions of Americans.”Jim Tankersley More

  • 113 Shares179 Views

    in Economy

    Analysis Deems Biden’s Climate and Tax Bill Fiscally Responsible

    by

    Despite Republican claims, the new legislation would be only a modest corporate tax increase, Congress’s Joint Committee on Taxation found.After more than a year of trying — and failing — to pack much of President Biden’s domestic agenda into a single tax-and-spend bill, Democrats appear to have finally found a winning combination. They’ve scrapped most of the president’s plans, dialed down the cost and focused on climate change, health care and a lower budget deficit.As soon as party leaders announced that new bill last week, Republicans began attacking it in familiar terms. They called it a giant tax increase and a foolish expansion of government spending, which they alleged would hurt an economy reeling from rapid inflation.But outside estimates suggest the bill would not cement a giant tax increase or result in profligate federal spending.An analysis by the Joint Committee on Taxation, a congressional nonpartisan scorekeeper for tax legislation, suggests that the bill would raise about $70 billion over 10 years. But the increase would be front-loaded: By 2027, the bill would actually amount to a net tax cut each year, as new credits and other incentives for low-emission energy sources outweighed a new minimum tax on some large corporations.That analysis, along with a broader estimate of the bill’s provisions from the nonpartisan Committee for a Responsible Federal Budget, suggests that the legislation, if passed, would only modestly add to federal spending over the next 10 years. By the end of the decade, the bill would be reducing federal spending, compared with what is scheduled to happen if it does not become law.And because the bill also includes measures to empower the Internal Revenue Service to crack down on corporations and high-earning individuals who evade taxes, it is projected to reduce the federal budget deficit over a decade by about $300 billion.Adding up the headline cost for what Democrats are calling the Inflation Reduction Act is more complicated than it was for many previous tax or spending measures that lawmakers approved. The bill blends tax increases and tax credits, just as Republicans did when they passed President Donald J. Trump’s signature tax package in 2017. But it also includes a spending increase meant to boost tax revenues and a spending cut meant to put more money in consumers’ pockets.Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, said the composition of the deal was vastly different from a larger bill that Democrats failed to push through the Senate in the fall. It included several spending programs that were set to expire after a few years, and budget hawks warned that the overall package would add heavily to federal debt if those programs were eventually made permanent, as Washington has been known to do, without offsetting tax increases.Ms. MacGuineas called the original idea, known as Build Back Better, “a massive gimmicky budget buster.” She had kinder words for the new package, saying it “manages to push against inflation, reduce the deficit, and, once fully phased in, it would actually cut net spending, without raising net taxes.”“That is a pretty monumental improvement,” she added.The bill springs from an agreement between Senator Chuck Schumer of New York, the majority leader, and Senator Joe Manchin III of West Virginia, a key centrist Democrat. President Biden blessed it last week, and it carries what remains of what was once his $4 trillion domestic agenda.Understand What Happened to Biden’s Domestic AgendaCard 1 of 7‘Build Back Better.’ More

  • 138 Shares119 Views

    in Economy

    Democrats Propose Raising Taxes on Some High Earners to Bolster Medicare

    by

    The draft plan, which is expected to be unveiled in the coming days, is part of talks over how to salvage pieces of President Biden’s domestic agenda.WASHINGTON — Senate Democrats will push to raise taxes on some high-earning Americans and steer the money to improving the solvency of Medicare, according to officials briefed on the plan, as they cobble together a modest version of President Biden’s stalled tax and spending package.The proposal is projected to raise $203 billion over a decade by imposing an additional 3.8 percent tax on income earned from owning a piece of what is known as a pass-through business, such as a law firm or medical practice. The money that would be generated by the change is estimated to be enough to extend the solvency of the Medicare trust fund that pays for hospital care — currently set to begin running out of money in 2028 — until 2031.It is the most recent agreement to emerge from private negotiations between Senator Chuck Schumer of New York, the majority leader, and Senator Joe Manchin III of West Virginia, a conservative-leaning Democrat who has demanded that his party rein in its sweeping ambitions for a domestic policy plan. In December, Mr. Manchin torpedoed efforts to pass Mr. Biden’s $2.2 trillion social safety net, climate and tax package because of concerns over its cost and impact on the economy at a time of rising inflation.His backing is critical because, with Republicans expected to be uniformly opposed, the only way Democrats can pass the package through the evenly divided Senate is to win unanimous backing from their caucus and do so under special budget rules that would shield it from a filibuster and allow it to pass on a simple majority vote.Mr. Schumer has worked to salvage key components of the plan that could meet that test, including a plan released on Wednesday to lower the cost of prescription drugs. Mr. Manchin has repeatedly said such legislation should focus on tax reform and drug pricing, as well as efforts to lower the national debt. The bill is also expected to include some climate and energy provisions, a key priority for Democrats, although they have yet to be agreed upon.Democratic leaders, who hope to move the legislation through the Senate this month, are expected to formally release the Medicare plan in the coming days, according to the officials, who disclosed preliminary details on the condition of anonymity.The fast-track budget process that the party plans to use for the overall package, known as reconciliation, requires legislation to abide by strict budgetary rules enforced by the Senate parliamentarian. The prescription drug legislation has been submitted to the parliamentarian, and Democrats plan to submit the tax increase and Medicare piece in coming days.The portion of Medicare that pays for hospital bills is funded through a special trust fund, largely financed by payroll taxes. But with escalating health care costs and an aging population, current revenues won’t be enough to pay all of Medicare’s hospital bills forever. According to the most recent report from Medicare’s trustees, the fund will be depleted in 2028 without new revenues or spending cuts.The Democrats’ plan would extend an existing 3.8 percent net investment income tax to so-called pass-through income, earned from businesses that distribute profits to their owners. Many people who work at such firms — such as law partners and hedge fund managers — earn high incomes, but avoid the 3.8 percent tax on the bulk of it.The new proposal would apply only to people earning more than $400,000 a year, and joint filers, trusts and estates bringing in more than $500,000, in accordance with Mr. Biden’s pledge that he would not raise taxes for people who make less than $400,000 a year. The proposal is similar to a tax increase Mr. Biden proposed in 2021 to help offset the cost of a set of new spending programs meant to help workers and families, like home health care and child care.Senator Joe Manchin III has said Democrats should focus on tax reform, prescription drug costs and efforts to lower the national debt.Tom Brenner for The New York TimesImposing the new tax on pass-through income would raise about $202.6 billion over a decade, according to an estimate from the Joint Committee on Taxation provided to Senate Democrats and reviewed by The New York Times. Those funds would be funneled directly into the Hospital Insurance Trust Fund, which covers inpatient hospital care, some home health care and hospice care.The Office of the Actuary in the Centers for Medicare & Medicaid Services informed Democratic staff that the additional revenue generated would extend the hospital trust fund’s solvency from 2028 to 2031.“Medicare is a lifeline for millions of American seniors and Senator Manchin has always supported pathways to ensure it remains solvent,” said Sam Runyon, a spokeswoman for Mr. Manchin. “He remains optimistic there is a path to do just that.”She cautioned that an overall deal on a broader climate, tax and spending package has yet to be struck. Some Democrats also hope to include an extension of expanded Affordable Care Act subsidies, which passed on a party-line vote in the $1.9 trillion pandemic aid package in 2021.“Senator Manchin still has serious unresolved concerns, and there is a lot of work to be done before it’s conceivable that a deal can be reached he can sign onto,” Ms. Runyon said.While Mr. Manchin has said he would support additional tax increases, any changes to the tax code must also win the support of Senator Kyrsten Sinema of Arizona, a centrist who opposed many of her party’s initial tax proposals.And while many Democrats are anxious to address climate change before the midterm elections, which may change the balance of power in Washington, Mr. Manchin, who has been protective of his state’s coal industry, continues to haggle over that issue.The heart of the climate plan is expected to be approximately $300 billion in tax credits to expand the development of clean energy like wind, solar and battery storage, a significantly smaller plan that reflects concessions to Mr. Manchin, according to several people familiar with the negotiations.Negotiators are also considering tax credits to incentivize the purchase of electric vehicles, though it is unclear whether Mr. Manchin will support such a provision.Lisa Friedman More

  • 138 Shares119 Views

    in Economy

    The Pandemic Flight of Wealthy New Yorkers Was a Once-in-a-Century Shock

    by

    New tax data reveal a steep population loss in 2020, toward the start of the pandemic. The exodus was temporary, but how much of its effects could be permanent?When roughly 300,000 New York City residents left during the early part of the pandemic, officials described the exodus as a once-in-a-century shock to the city’s population.Now, new data from the Internal Revenue Service shows that the residents who moved to other states by the time they filed their 2019 taxes collectively reported $21 billion in total income, substantially more than those who departed in any prior year on record. The IRS said the data captured filings received in 2020 and as late as July 2021.Many new or returning residents have since moved in. But the total income of those who had initially left was double the average amount of those who had departed over the previous decade, a potential loss that could have long-term effects on a city that relies heavily on its wealthiest residents to support schools, law enforcement and other public services.The sheer number of people who left in such a short period raises uncertainty about New York City’s competitiveness and economic stability. The top 1 percent of earners, who make more than $804,000 a year, contributed 41 percent of the city’s personal income taxes in 2019.About one-third of the people who left moved from Manhattan, and had an average income of $214,300. No other large American county had a similar exodus of wealth.Early in the pandemic, Sam Williamson, 51, a white-collar defense lawyer living on the Upper West Side of Manhattan, first relocated to Utah, then to Long Island. After a return to the city, he and his family permanently moved to Miami last year when his law firm opened an office there.“I love New York City, but it’s been a challenging time,” Mr. Williamson said. “I didn’t feel like the city handled the pandemic very well.”The average income of city residents who moved out of state was 24 percent higher than of those who moved the year prior, according to a New York Times analysis of federal tax returns that were due in 2020. It was the biggest one-year income increase among people who left the city for other states in at least a decade.The tax data is in line with the most recent Census Bureau estimates, which showed that in the first year of the pandemic, the number of New York City residents who left was more than triple the typical annual outflow before the pandemic. International immigration, a key source of growth in New York, plummeted to one-fourth the level prepandemic. And the death rate surged, as approximately 17,000 more residents died than in a typical year.All of this led to a loss of about 337,000 people in New York City between April 2020 and June 2021, according to census estimates, a startling drop after the city’s population reached 8.8 million residents, a record high, in early 2020.New York City’s official demographers say that the pandemic was a blip in the city’s long-term population growth and that migration trends have returned to prepandemic levels, pointing to indicators like change-of-address requests and soaring rents that suggest people are flooding back.But, they said, it is too soon to conclude when the population that was lost will be completely replaced.And other indicators suggest flight from the city may be continuing. Public school enrollment this year is down 6.4 percent compared with before the pandemic, according to New York City Department of Education data, and private school enrollment decreased by 3 percent, according to state data, potentially signaling a reduction in the number of families that could hurt the city’s ability to foster a diverse work force.“All of these are underlying trends that are concerning,” said Andrew Rein, president of the Citizens Budget Commission, a nonpartisan fiscal watchdog. “We don’t know what this means permanently, but things have shifted in a way that should give anybody looking at this some serious pause.”In the years before 2019, the people who left and the people who stayed in New York City had similar average incomes, the IRS data showed. But during the pandemic, the residents who moved had average incomes that were 28 percent higher than the residents who stayed.Still, New York City collected more tax revenue in both 2020 and 2021 than in 2019, thanks in part to at least $16 billion in federal pandemic aid.The outlook for this year has become much less certain as the stock market has plummeted in recent months and certain forms of federal aid, like stimulus checks and expanded unemployment benefits, have ended.The city’s Independent Budget Office said it was not possible to calculate the tax revenue lost from the people who had moved because some of them could be working remotely for New York-based companies and paying city income tax. In the long term, the office said, their tax status could become a major policy issue as states fight for their share of taxes from remote workers.Sophia and Charlie Blackett relocated last year to Rowayton, Conn., from Brooklyn, partly because both of their jobs in tech allowed them to permanently work from home. Ms. Blackett, 27, had previously considered raising children in the city, but the confinement of the pandemic shifted her thinking.“I used to thrive on the hustle and bustle,” she said. Now, she said, “I think about waking up in my bed in an apartment, and I just feel a little bit anxious.”The issue has become a talking point in the governor’s race. Gov. Kathy Hochul, a moderate Democrat, said earlier this year that the steep population drop in New York State, driven by the city losses, was “an alarm bell that cannot be ignored.” Representative Tom Suozzi of Long Island, a centrist challenging her in this month’s primary, has blamed the exodus on crime, high taxes and an unaffordable cost of living.Gergana Ivanova, 28, a clothing designer and social media influencer, said her decision to move to Miami was less about taxes. The pandemic made the downsides of living in New York City more noticeable, she said, including the lack of space in her tiny Queens apartment and the trash piling up on the sidewalks. She felt less safe walking around when the streets were emptier.“It didn’t feel happy and positive like it used to,” she said.Gergana Ivanova at Margaret Pace Park in Miami, where she moved from Queens.Scott McIntyre for The New York TimesUrban planners and economists have long debated the extent to which policymakers should be concerned about the outflow of New Yorkers to other states. Some see it as a positive sign of mobility for people who start their careers in New York, making way for new arrivals to inject vibrancy into neighborhoods.In a new report published Thursday, the Department of City Planning said federal immigration levels and change-of-address data from the Postal Service show that New York City’s population trends likely returned to prepandemic levels by the second half of 2021. And deaths from Covid-19 are significantly lower than early in the pandemic.Since the 1950s, New York City has had a net loss of residents to other states, but the population still grew because the number of immigrants and new births surpassed the number of people who moved away.The pandemic spurred a flight to many of the same suburbs that have long attracted New Yorkers seeking more space, including Connecticut’s Fairfield County and New Jersey’s Bergen and Essex Counties. But it also triggered residents to leave for more far-flung destinations, including Hawaii, the Florida Keys and ski towns in Colorado, Utah and Wyoming.Charlie and Sophia Blackett moved to Rowayton, Conn., from Brooklyn.Anthony Nazario for The New York TimesThe exodus to Florida was especially robust, and not just for the retiree crowd. In 2020, New York City had a net loss of nearly 21,000 residents to Florida, IRS data showed, almost double the average annual net loss from before the pandemic.The pandemic accelerated the relocation of several New York-based financial firms to new offices or headquarters in Florida. Many of them have landed in Palm Beach, Fla., including the hedge fund Elliott Management, whose co-chief executive, Jonathan Pollock, is now a full-time Florida resident, according to records obtained by The New York Times.The Manhattan residents who moved to Palm Beach County had an average income of $728,351, IRS data showed.Many New Yorkers also moved because they lost their jobs in the industries hardest hit by the pandemic. In New York City, the unemployment rate is almost double the nation’s, in part because the city still has at least 61,000 fewer leisure and hospitality jobs than before the pandemic, according to the most recent jobs report.Zak Jacoby was the general manager of a bar on the Lower East Side when the pandemic hit. Throughout 2020, his employment status fluctuated with the city’s changing indoor dining rules, a stressful period that put him on and off unemployment benefits.Mr. Jacoby, 37, flew to Miami in January 2021 to see a friend — and decided to stay permanently after getting a job offer at a local restaurant group. If there was another virus surge, he said, the state would be less likely to shut down businesses, giving him more job security.“My mind-set was, Florida’s more lenient on Covid, and there’s going to be less regulation,” he said.During his first six months in office, Mayor Eric Adams visited cities like Miami and Los Angeles as part of what he said were efforts to lure businesses and residents back to New York.Jonathan Koplovitz, 53, an executive at an automotive engineering and design start-up, is among the residents who came back.As the virus began sweeping through New York, Mr. Koplovitz and his family moved from their apartment in Manhattan’s Chelsea neighborhood to Aspen, Colo., the upscale ski resort town. Expecting to stay permanently, they bought a home about a mile from the ski lifts, where his two teenage sons finished the rest of the school year with virtual classes.But on a trip back to New York, he found the city to be far more vibrant than the darkest days of the pandemic. Once in-person schooling resumed in fall 2020, the family decided to return.“There’s no place like New York,” Mr. Koplovitz said. More

  • 125 Shares199 Views

    in Economy

    Biden to Include Minimum Tax on Billionaires in Budget Proposal

    by

    The tax would require that American households worth more than $100 million pay a rate of at least 20 percent on their full income, as well as unrealized gains in the value of liquid assets like stocks.WASHINGTON — The White House will ask Congress on Monday to pass a new minimum tax on billionaires as part of a budget proposal intended to revitalize President Biden’s domestic agenda and reduce the deficit.The tax would require that American households worth more than $100 million pay a rate of at least 20 percent on their full income, as well as unrealized gains in the value of their liquid assets, such as stocks, bonds and cash, which can accumulate value for years but are taxed only when they are sold.Mr. Biden’s proposal to impose a tax on billionaires is the first time he has explicitly called for a wealth tax. While many in his party have advocated taxes that target an individual’s wealth — not just income — Mr. Biden has largely steered clear of such proposals in favor of increasing the top marginal income tax rate, imposing a higher tax on capital gains and estates, and raising taxes on corporations.The “Billionaire Minimum Income Tax” would apply only to the top one-hundredth of 1 percent of American households, and over half of the revenue would come from those worth more than $1 billion. Those already paying more than 20 percent would not owe any additional taxes, although those paying below that level would have to pay the difference between their current tax rate and the new 20 percent rate.The payments of Mr. Biden’s minimum tax would also count toward the tax that billionaires would eventually need to pay on unrealized income from assets that are taxed only when they are sold for a profit.The tax proposal will be part of the Biden administration’s budget request for the next fiscal year, which the White House plans to release on Monday. In a document outlining the minimum tax, the White House called it “a prepayment of tax obligations these households will owe when they later realize their gains.”“This approach means that the very wealthiest Americans pay taxes as they go, just like everyone else,” the document said.As the administration grapples with worries over rising inflation, the White House also released a separate document on Saturday saying that Mr. Biden’s budget proposal would cut federal deficits by a total of more than $1 trillion over the next decade.The idea of imposing a wealth tax has gained traction since Mr. Biden was elected as Democrats have looked for ways to fund their sweeping climate and social policy agenda and ensure that the wealthiest Americans are paying their fair share.Senator Elizabeth Warren, Democrat of Massachusetts, and Senator Ron Wyden, Democrat of Oregon and the chairman of the Finance Committee, released separate proposals last year that would tax the wealthiest, albeit in different ways. Ms. Warren had championed the idea of a wealth tax in her unsuccessful presidential campaign.The decision by the administration to call for a wealth tax also reflects political realities over how to finance Mr. Biden’s economic agenda.Moderate Democrats, including Senator Kyrsten Sinema of Arizona, have balked at raising the corporate tax rate or lifting the top marginal income tax rate to 39.6 percent from 37 percent, leaving the party with few options to raise revenue.Still, Senator Joe Manchin III, Democrat of West Virginia, slammed the idea of taxing billionaires after Mr. Wyden’s proposal to do so was released, although Mr. Manchin has since suggested he could support some type of billionaires’ tax.Legal questions about such a tax also abound, particularly whether a tax on wealth — rather than income — is constitutional. If Congress approves a wealth tax, there has been speculation that wealthy Americans could mount a legal challenge to the effort. More

  • 138 Shares199 Views

    in Economy

    Democrats Push for Agreement on Tax Deduction That Benefits the Rich

    by

    Lawmakers are coalescing around a deal to suspend a $10,000 cap on state and local tax deductions that was imposed during the Trump administration.WASHINGTON — Democrats were readying an agreement on Tuesday that would repeal a cap on the amount of state and local taxes that homeowners can deduct as part of a broader $1.85 trillion spending bill, a move that could amount to a significant tax cut for wealthy Americans in liberal states.But some liberals quickly balked at the emerging agreement, which would suspend a $10,000 cap on the so-called SALT deduction for five years, removing a limit that Republicans included in their 2017 tax package as a way to pay for cuts for corporations and the rich. The suspension would kick in for deductions related to property taxes and state and local income taxes accrued in 2021 and would run through 2025.If it passes, the deal would be a major concession to a handful of Democrats from high-income states like New York and New Jersey who have insisted on lifting the cap, in order to win their votes for President Biden’s social policy and climate change package.But liberal Democrats have scoffed at the push to include the costly proposal in the domestic policy package, particularly as party leaders have curtailed or eliminated other spending priorities as they pare down a $3.5 trillion blueprint to appease moderate and conservative-leaning Democrats.Senator Bernie Sanders of Vermont, the chairman of the Budget Committee, blasted the repeal on Tuesday as a giveaway to the rich that went against the Democrats’ priorities.“I think there is a compromise to be reached here, a middle ground, which says that for families earning less than $400,000, they can take a complete exemption, but not families earning more than that,” said Mr. Sanders, who had released a blistering statement criticizing the agreement. “What exists is unacceptable, and one way or another it will be dealt with.”It remains unclear whether the agreement would apply broadly or if Democrats planned to impose an income cap to prevent the wealthiest Americans from receiving what amounts to a tax cut.A straight repeal of the cap for every household that claims the deduction would siphon huge amounts of revenue from the federal government: about $90 billion per year, according to budget experts.To get around that, the five-year suspension assumes that the cap is reinstated in 2026 for another five years, allowing Democrats to use a budget sleight of hand to show its removal as revenue neutral in the traditional 10-year window that lawmakers look to when considering a bill’s impact on the federal deficit.Three people with knowledge of the emerging agreement described it on the condition of anonymity and cautioned that discussions were continuing. Details of the talks were first reported by Punchbowl News.With Republicans opposed to Mr. Biden’s domestic policy plan, Democrats must win the support of all 50 senators who caucus with the party and all but three House lawmakers for the plan to become law. That effort is further complicated because Democrats are using an arcane process known as budget reconciliation, which shields fiscal legislation from the 60-vote filibuster threshold in the Senate.Those restrictions mean that any lawmaker, particularly in the Senate, could effectively tank the legislation over his or her priorities, including insisting that the bill repeal SALT. Democrats from the high-income states that have been most affected by the limit have spent the past five years searching for an opportunity to roll it back for their constituents, despite complaints that it would largely benefit the wealthy.House Democrats including Representatives Tom Suozzi of New York, Mikie Sherrill of New Jersey and Josh Gottheimer of New Jersey have made clear that they will not support the broader spending package without a SALT repeal. Mr. Gottheimer wore a large button emblazoned with the words “no SALT, no dice” to votes on Capitol Hill on Tuesday. Senator Chuck Schumer of New York, the majority leader, has also voiced support for getting rid of the cap.“We’ve been fighting for this for years,” Mr. Gottheimer said on Tuesday, adding that reinstating the full deduction would amount to giving “tax relief to families that deserve it and who got hosed in 2017.”Delaying the cap for five years in a 10-year window could effectively allow lawmakers to claim that the proposal would not have an impact on the package’s cost. Yet some Democrats appeared confident that lawmakers would act again in five years to prevent the cap from going back into effect.“It’ll be pretty clear when they get tax relief, it’s going to be hard to take that back,” Mr. Gottheimer said, referring to families in his district.The SALT limit resulted in tax increases for wealthier Americans beginning in 2018, particularly higher earners from high-tax states, and helped Democrats capture some House seats that Republicans previously held in New Jersey, California and elsewhere.The deduction is largely used by wealthy homeowners who itemize their deductions and live in states and cities with high taxes, which tend to be led by Democrats. Democrats accused Republicans of using the cap to pay for other tax cuts for the rich and to penalize liberal states.“My guess is the majority of Americans with a net worth of $50 to $300 million would get a tax cut under the Build Back Better plan with a full repeal of SALT,” Jason Furman, an economist at Harvard who was the chairman of the White House Council of Economic Advisers under President Barack Obama, said on Twitter on Tuesday. “The bill would do more for the super-rich than it does for climate change, childcare or preschool. That’s obscene.”But several lawmakers in the New York and New Jersey delegations have warned that their votes for the domestic policy package hinged on the inclusion of the provision, and Democrats have haggled for months over a possible solution.“We’re still going at it over it,” said Representative Richard E. Neal of Massachusetts, the Democratic chairman of the Ways and Means Committee, who joked on Tuesday that he had earned “a Ph.D. in the SALT deduction because it’s been argued from every perspective I can think of.”The Committee for a Responsible Federal Budget described the repeal of the SALT cap as a “regressive” tax cut, estimating that it would cost $90 billion a year in lost government revenue. The wealthiest would make out the best, with a SALT cap repeal distributing more than $300,000 per household in the top 0.1 percent of earners and only $40 for a middle-income family over the first two years.“With the SALT cap repealed and current tax rates retained, in fact, the reconciliation package might actually offer a net tax cut for most high-income households,” the group said.The right-leaning Tax Foundation estimated that repealing the cap would increase after-tax income of the top 1 percent of earners by 2.8 percent, while the bottom 80 percent would get minimal benefit.Republicans seized on the agreement on Tuesday, accusing Democrats of hypocrisy for backing an “anti-progressive” handout.“First Democrats cut out paid leave,” J.P. Freire, a spokesman for Republicans on the House Ways and Means Committee, said on Twitter. “Now they’re shoveling money to the rich.” More