‘Tax the rich’ plans at risk as Democrats’ talks drag on

‘Tax the rich’ plans at risk as Democrats’ talks drag on
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Major parts of the Democrats’ plan to tax the rich are in jeopardy of falling out of their sweeping proposal to expand the nation’s social safety net as negotiations continue.

President Joe Biden and congressional Democrats’ longstanding push to make wealthy Americans — and corporations — “pay their fair share” may run aground amid opposition from moderate Democrats, particularly Arizona Sen. Kyrsten Sinema.

Illinois Sen. Dick Durbin, the second-ranking Senate Democrat, told reporters Thursday that he believes the hikes are being dropped from consideration — noting that “I wish we could do it in the Senate.”

But, he added, only Biden, House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer know for sure the exact status of the tax increases, which have come into intense focus in the last few days.

The White House reiterated Thursday that the package has to be paid for.

“It has to be paid for. And we want to make sure that the wealthiest among us, the billionaires and the big corporations, pay their fair share. That’s only right,” said Karine Jean-Pierre, White House principal deputy press secretary.

Sinema is particularly opposed to raising the corporate tax rate and the highest marginal income tax rate for individuals. But she has agreed to other provisions involving taxes on the wealthy and big companies, which would fully pay for a slimmed down package, CNN has reported.

Raising multiple levies on the rich and big companies also served as the main vehicle to pay for the massive budget reconciliation package.

Without them, Democrats would have to find other ways to fulfill their promise that the spending measures will be offset — a task made even harder by the opposition among moderate members to allowing Medicare to negotiate drug prices, which would provide $700 billion in savings.

Top Biden administration officials are now weighing a range of different ideas to finance the package in light of Sinema’s stance on corporate tax hikes, CNN has reported.

Negotiations are ongoing, and it’s still unclear what will remain in the package, which calls for universal pre-K, paid family and medical leave benefits and an extension of the child tax credit among other priorities. Democratic leaders are racing to shrink the bill from its original $3.5 trillion price tag to secure the votes of Sinema and West Virginia Sen. Joe Manchin.

Here are the tax provisions that are at risk:

Making the wealthy pay more

A draft House version of the spending plan calls for increasing the top marginal rate on individuals to 39.6%, up from the 37% rate set by the Republicans’ 2017 tax cut law.

The rate would apply to individuals with taxable income over $400,000 a year and married couples filing jointly earning over $450,000 annually.

The top capital gains rate would increase to 25%, from 20%.

In addition, lawmakers would add a 3% surtax on individuals earning more than $5 million.

The plan also calls for raising the top capital gains tax, which is generally imposed on the profit made from selling a stock or property, to 25% from 20%, reducing the estate tax exemption, as well as limiting the maximum value on the deduction for pass-through businesses.

Biden has pledged to raise taxes only on those who earn more than $400,000 a year. Experts say his plan generally meets that requirement, though some Americans who earn less may still be indirectly affected by some of the proposed changes.

Many economists assume, for example, an increase in the corporate tax rate would result in lower wages for workers. And other elements, like a higher tax on cigarettes, would disproportionately affect low- and middle-income households.

An analysis by the right-leaning Tax Foundation found that roughly 90% of households would not see a tax increase during the first year the plan is in effect. Those Americans could end up with more money in their pockets largely due to the expanded child tax credit.

Raising corporate taxes

The House proposal calls for increasing the top corporate tax rate to 26.5%, up from the current 21% set by the Republicans’ 2017 tax cut law. It would only apply to businesses with income in excess of $5 million. Biden had initially called for hiking the corporate rate to 28% to pay for his economic recovery agenda. Prior to the 2017 law, the top rate was 35%.

And the House proposal would raise the minimum tax on foreign earnings of US companies to 16.5%, from the current 10.5%. Biden had suggested pushing it up to 21%.

The Biden administration recently secured a preliminary victory on the global tax front. A group of 136 countries have agreed to a global treaty that would tax large multinationals at a minimum rate of 15% and require companies to pay taxes in the countries where they do business.

But the treaty will need to be ratified via a two-thirds majority in the US Senate, which could be a tough sell.

Beefing up IRS enforcement

The plan would also give the Internal Revenue Service an additional $80 billion over the next 10 years for tax enforcement of high-income Americans, which the Congressional Budget Office estimated could raise $200 billion.

The enforcement plan calls on banks to provide data on individuals’ accounts with total annual deposits or withdrawals of more than $10,000, but Republicans have slammed this proposal as an invasion of privacy. Democrats originally proposed setting the threshold at $600.

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