The United States Treasury Department and the Internal Revenue Service (IRS) announced on Wednesday new rules aimed at closing major tax loopholes that have allowed big businesses and wealthy individuals to avoid paying their fair share of taxes.
The move comes as part of President Biden’s efforts to reform the country’s tax system in order to raise revenue and reduce inequality.
Here are some key points from the announcement:
- According to estimates, these new rules will generate an additional $700 billion in revenue over the next decade.
- This amount is equivalent to about 1.8% of the country’s gross domestic product (GDP)
- The rules will target large corporations and high-income individuals who have been exploiting loopholes in the tax code to minimize their tax payments.
- One of these loopholes, known as “step-up basis,” allows wealthy individuals to pass on assets to their heirs without paying capital gains taxes on them.
- Under the new rules, these assets will be taxed at death unless they are passed on to a spouse or charity.
- Another loophole that will be closed is related to carried interest, which has allowed wealthy hedge fund and private equity managers to pay significantly lower tax rates.
- The new rules will also strengthen the enforcement of existing tax laws, including increasing audits for high-income individuals and corporations.
- The Treasury Department has estimated that these efforts could generate an additional $4.5 billion in revenue over the next 10 years.
- In addition, the IRS is planning to hire more auditors and modernize its technology to better detect and prevent tax evasion by high-income individuals and corporations.
- Treasury Secretary Janet Yellen stated that these changes are necessary to ensure that everyone pays their fair share of taxes and to create a more equitable tax system.
- She also emphasized that these measures are key to funding important government programs and making investments in education, infrastructure, and other areas that benefit all Americans.
These new rules are a crucial step towards closing the wealth gap and ensuring that the country’s top earners contribute their fair share to society. With the additional revenue generated, the government will have more resources to invest in programs that support low-income families and promote economic growth for all.
However, it remains to be seen how these changes will be received by big businesses and wealthy individuals who may push back against them.
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