|President Biden proposed a $5.8 trillion budget for FY 2023 early Monday, March 28 – a similar proposed budget than the past year but $200 billion less. The Council’s Government Affairs team is scrutinizing the massive document for any provisions that impact the commercial insurance brokerage industry. Our first review is that there are no brokerage-specific provisions, and the proposed tax changes would impact different individuals and firms depending on corporate structure.
The budget calls for new taxes on the uber-wealthy and corporations – which won’t happen unless Democrats push through a reconciliation package – as well as more money for the Pentagon, crime-fighting efforts to boost affordable housing, countering climate change and a host of other initiatives.
Please see below for the President’s FY 2023 budget request, along with associated supporting documents. Additional Analytical Perspectives chapters and other supporting materials will be posted on OMB’s website later this week.
|Overall, Biden is proposing a $109 billion increase in discretionary spending from the recent omnibus FY 2022 spending deal, to $1.58 trillion. That would be a 7.4% increase from last year. The Pentagon and other national security agencies would see a 4% increase ($31 billion), which progressives won’t like, while spending on social programs would rise by 9.5%, or $56 billion. Republicans are already opposed to this. Spending on Veterans Affairs medical programs would jump by $21 billion.
The Administration projects that its proposal will lessen the deficit by a projected $1 trillion over the next decade. “A lower deficit will help ease long-term inflationary pressure and make our fiscal trajectory more sustainable,” White House Council of Economic Advisers Chair Cecilia Rouse told reporters on a Monday morning conference call. However, the White House estimates that overall federal debt will still grow by more than $13 trillion during that 10-year period, with deficits of more than $1 trillion annually.
The proposal also includes a deficit-neutral “reserve” for savings generated by enacting parts of Biden’s legislative agenda, such as cutting prescription drug costs. This isn’t going to happen unless Democrats in Congress pass some new version of the Build Back Better Act, which Sen. Joe Manchin (D-W.Va.) blocked in December. There are discussions happening on that front, yet Democrats are far from any agreement on what could be included in that package.
“The deficit neutral reserve fund is meant to leave the space, the revenue specifically, to allow congressional negotiators the room to do what President Biden has asked,” OMB Director Shalanda Young said, according to the political newsletter Punchbowl. “We’ve been clear that the president wants to sign legislation that cuts costs for families and reduces the deficit. But to be conservative, the budget reflects this reserve fund as deficit neutral.” Overall, this budget is being portrayed as appealing to moderate Democrats, such as Manchin and the swing-state lawmakers who face a tough reelection in November.
Here is the White House’s fact sheet about the budget and here is the president’s statement.
Of note to the many CIAB firms that are structured as pass-through organizations, the “Billionaire’s Tax” would impose a flat, 20% rate on the combined income and unrealized capital gains of taxpayers with a minimum average wealth of $100 million. The plan would mandate billionaires to pay a tax rate of at least 20% on their full income, or the combination of traditional forms of wage income and whatever they may have made in unrealized gains, such as higher stock prices.
The S Corporation Association blasted the proposal in strong terms this morning:
|Our team will continue to monitor any and all budget and tax issues before Congress affecting our industry and clients, and will keep you apprised.
– The Council’s Government Affairs team