Sseptember 14, 2021
Senior House Democrats are coalescing around a draft proposal that could raise as much as $2.9 trillion to pay for most of President Joe Biden’s sweeping expansion of the social safety net by increasing taxes on the wealthiest corporations and individuals, The New York Times reports.
The preliminary proposal, which circulated on and off Capitol Hill on Sunday, September 12, would raise the corporate tax rate to 26.5 percent for the richest businesses and impose an additional surtax on individuals who make more than $5 million.
But the revenue provisions outlined in a document obtained by The New York Times and reported earlier by The Washington Post fall short of fully financing the entire package Democrats are cobbling together, despite promises by Biden and Democratic leaders that it would be fully paid for in order to assuage concerns from moderates in their caucus.
Still, White House spokesperson Andrew Bates was cheerful about its prospects— commenting that the outline “makes significant progress toward ensuring our economy rewards work and not just wealth by cutting taxes for middle-class families, reforming the tax code to prevent the offshoring of American jobs and making sure the wealthiest Americans and big corporations pay their fair share.”
Specifically, the proposal would raise the corporate tax rate to 26.5% from 21% for businesses that report more than $5 million in income. The corporate tax rate would be lowered to 18% for small businesses that make less than $400,000; and would remain at 2% for all other businesses. The president originally had proposed raising the corporate tax rate to 28%, a larger increase that both corporations and moderate Democrats have resisted.
To help raise what the draft’s authors estimate could be $900 billion in taxes on corporations, Democrats suggest additional changes to the tax code that are intended to bolster a global push to set minimum taxes for corporate income and crack down on multinational companies shifting profits to tax havens, a process that the administration is championing abroad.
According to the Times, House Democrats also are considering an increase to the top marginal income tax rate to 39.6% from 37% for households that report taxable income over $450,000 and for unmarried individuals who report more than $400,000. For people who make more than $5 million, the proposal would impose a 3% surtax, which is expected to raise $127 billion.
It also increases the top tax rate for capital gains—the proceeds from selling an asset like a boat or stocks to 25% from 20%. Biden essentially had proposed doubling that tax rate. The proposal also would provide $80 billion over the next ten years for the Internal Revenue Service to beef up tax enforcement, a provision that budget scorekeepers estimate would raise $200 billion.
And while Bates, the White House spokesperson, said that the draft outline adhered to Biden’s pledge to avoid raising taxes on Americans who make less than $400,000, the document suggests increasing the tax rate for tobacco products and imposing a tax on other products that use nicotine, such as e-cigarettes. That provision is expected to raise $96 billion.
The document also outlines the possible inclusion of drug pricing provisions and changes in tax rules to “treat cryptocurrency the same as other financial instruments.”
The full House tax-writing committee still needs to release and advance text of the legislation, and it is unclear if a sufficient number of Democrats will embrace the package in the House and the Senate. In order to protect the economic package from a Republican filibuster and pass it with a simple majority, Democrats can spare only three votes in the House and must remain united in the Senate.
Research contact: @nytimes