The National Lumber and Building Material Dealers Association (NLBMDA) reported that the White House has released details of President Biden’s proposed budget request to Congress for fiscal year (FY) 2022.
The budget calls for $6 trillion in federal spending for FY 2022 along with new taxes on corporations and wealthy individuals. The president’s request is mainly comprised of his previously released infrastructure proposals which include the American Jobs Plan and the American Families Plan.
The request also calls for new investments in housing and extending energy efficiency tax incentives for residential and commercial construction.
The NLBMDA said it has been lobbying senior officials within the administration and Congress since the beginning of 2021 on critical tax priorities. Partly in response to NLBMDA’s advocacy, Biden’s budget proposal does not include any changes to the current 20% pass-through deduction available to owners of sole proprietorships, partnerships and S corporations.
Additionally, members of Congress have directly told NLBMDA that they expect the other tax increases included in Biden’s proposals to face opposition by members on both sides of the aisle significantly due to NLBMDA’s lobbying efforts.
The NLBMDA noted that the president’s annual budget request is seen as an aspirational document that lays out the administration’s legislative agenda and is not required to be passed by Congress. These proposals are simply recommendations for Congress to consider as they put together appropriations bills for the next fiscal year.
The NLBMDA said that it is continuing to analyze the president’s budget request and will continue to lobby the administration and Congress on the LBM industry’s legislative priorities.
President Biden’s FY 2022 Budget Request:
American Jobs Plan: $2.3 trillion for infrastructure investments including roads, bridges, water systems, housing, rail and broadband.
American Families Plan: $1.8 trillion for investments in childcare, education, paid leave and other social programs.
Discretionary Spending: $1.5 trillion for discretionary spending which includes annual funding for defense and other federal agencies.
- No change to the 20% pass-through deduction for small businesses.
- Increase the corporate tax rate to 28%.
- Increase the top marginal individual income tax rate to 39.6%.
- Tax capital gains at ordinary income rates for households making over $1 million. Currently, this would mean a tax on capital gains at 37% for high-earners. Under Biden’s plan, the top capital gains tax rate would be 39.6% (43.4% when including net investment income tax).
- Ends practice of “stepping-up” the basis for capital gains in excess of $1 million unless the property is donated to charity. Includes exemption for family-owned businesses and farms that are given to heirs who will continue to run the business.
Housing and School Construction:
- Expand the Low-Income Housing Tax Credit.
- Create a new Neighborhood Homes Investment Tax Credit. The credit would support new construction for sale, substantial rehabilitation for sale, and substantial rehabilitation for existing homeowners.
- Provide federally subsidized state and local bonds for school construction and improvements.
- Extend the section 25C tax credit for home improvements for five years and increase the lifetime limit to $1,200.
- Increase the section 45L tax credit for new home construction from $2,000 to $2,500 and extend the tax credit five years.
- Increase the maximum section 179D deduction for energy-efficient commercial buildings from $1.80 to $3.00 per square foot for qualifying property placed in service after Dec. 31, 2021.