Trump’s proposed budget thin on tax details

Tax Hot Topics newsletter The White House unveiled a $4.8 trillion budget proposal for the 2021 fiscal year on Feb. 10 that proposes a handful of tax provisions and would significantly bump IRS funding.

The administration is seeking $12 billion in base IRS funding, a $500 million increase from 2020. This includes $300 million for the agency’s ongoing IT modernization effort, with proposals to digitize more communication between the IRS and taxpayers, create a call-back function to reduce hold times for phone service, and allow for easier online payments. The proposal also requests $15 billion to expand and strengthen tax enforcement, which is estimated to generate $64 billion in net revenue over 10 years.

Congress is not required to formally consider the president’s proposed budget, and it is often best viewed as a statement of the administration’s policy priorities.

However, the Trump Administration has not used the budget to lay out a detailed tax platform as was common with many past administrations. The budget does not include any details on the middle-class tax cut proposal that Trump has promised will be unveiled the coming the months, but it does incorporate several longstanding tax priorities and offers a handful of specific tax provisions.

Most notably, the budget allocates $1.4 trillion over 10 years to make permanent the individual and estate and gift tax provisions enacted by the Tax Cuts and Jobs Act, which are set to expire on Dec. 31, 2025. This is likely to be a centerpiece of any “Tax Reform 2.0” efforts. The individual provisions include cuts to individual tax rates, doubling of the standard deduction to $12,000 (or $24,000 for married couples filing jointly), the pass-through deduction under Section 199A and the $10,000 cap on the state and local tax deduction.

Other specific tax proposals, all carried over from last year’s budget, include:

  • Allowing the IRS to regulate return preparers
  • Expanding IRS “math error” authority to make assessment without a full examination
  • Requiring Social Security numbers for claiming the earned income tax credit and child tax credit
  • Repealing several green energy incentives, such as credits for electric vehicles, residential energy-efficient property and renewable-energy investment

Dustin Stamper
Managing Director
Washington National Tax Office
T +1 202 861 4144

Omair Taher
Senior Associate
Washington National Tax Office
T +1 202 861 4143

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