(c) 2021, The Washington Post – Tony Romm, Jeff Stein
A powerful panel of House Democrats circulated a draft plan Sunday that would raise $ 2.9tn (trillion dollars) in new taxes and profits primarily directed toward wealthy Americans, corporations and investors, as US lawmakers party continue to argue in public about the size and scope of their new tax and spending package.
The new proposal includes many measures that are expected to have broad support from Democrats, such as increasing the maximum tax on Americans who earn more than $ 435,000 a year from 37% to 39.6%. It also raises the corporate tax to 26.5% for highly profitable businesses, a higher rate than the previous 21% but lower than President Joe Biden’s original proposal of 28%. Some smaller businesses would see their taxes stay at the current rate or even get reductions under the new plan.
Many elements in the new draft have been scaled down from the more ambitious tax increase Biden sought earlier this year. But the ideas taken together would lead to a major reversal of the tax deductions set by Republicans under former President Donald Trump four years ago, receiving praise from the White House on Sunday.
The draft tax proposal includes a few surprises, including a smaller-than-expected increase in the capital gains tax from 20% to 25%. Biden’s original plan had to double that rate. Instead, the plan would also establish a “high-income surcharge” that would be paid by Americans with incomes greater than $ 5 million – a measure that would raise about $ 127 billion.
Democrats also proposed a tiered system for corporate tax rates: Only businesses with incomes above $ 5 million would pay the new rate of 26.5%. Businesses earning between the cap and $ 400,000 would remain at the same 21% tax rate and those earning less than $ 400,000 would see a tax cut to 18%.
The proposal deepens measures to increase tax revenue from “tobacco and nicotine” to approximately $ 100 billion, while at the same time raising $ 16 billion by changing the rules so as to “tax cryptocurrencies in the same way as others. financial instruments”. And it would reform the US international tax system to prevent companies from shifting their profits to tax havens abroad. It would further limit domestic tax deductions to foreign-based companies.
Rep. Richard E. Neal, Democrat of Massachusetts, chairman of the House Ways and Means Committee, circulated the document this Sunday to other members. The Washington Post was able to obtain a copy of the document, and two people familiar with the matter, who spoke on condition of anonymity to describe changes in tax policies that have not yet been finalized, confirmed the details of the plan. The committee did not comment.
Democrats argue that the entire tax increase plan as a whole can help raise as much as $ 2.9tn over the next 10 years, which they say is a preliminary estimate. The figure also includes savings achieved as a result of stricter compliance with existing tax laws and additional reforms focused on benefits for purchasing drugs through Medicare. Lawmakers believe this means that the $ 3.5tn package can be fully paid for, as it also relies on a budget measure known as a dynamic score, which takes into account economic activity generated by federal investment.
Reacting to news about the plan, White House spokesman Andrew Bates said Sunday afternoon that the proposal “makes significant progress in ensuring that our economy rewards work and not just wealth.” that delivers on the president’s promise to reverse Trump’s tax cuts in a way that doesn’t raise taxes on Americans who earn less than $ 400,000 a year.
The new details about the tax plan come on a day as discussions among Democrats about Biden’s economic agenda are intensifying, as Senator Joe Manchin III, D-Virginia, threatened to vote against a tax package and expenses if the figure is $ 3.5tn.
Instead, Manchin called on Democrats to cut the amount, perhaps by more than half, while broadly criticizing the proposal, including some of the programs to alleviate child poverty and combat climate change. The possibility of reducing expenses did not please Senator Bernie Sanders, Independent for Vermont, who said that a smaller economic package was “unacceptable.”
The events foresee the possibility of a political stalemate in the process to achieve a proposal to reform federal health, education, immigration and tax laws. The plot has unfolded on Capitol Hill via grueling legislative sessions that have at times pitted moderates against liberals over the total amount of the final package and the scope of their policies. House Speaker Nancy Pelosi, Democrat of California, expects to have the proposal fully written by September 15.
In their attempt to resolve the disputes, Democrats face the harsh political reality that they must remain united in a Congress where they have little or no control, if they hope to pass what could be the largest economic package in US history. The stakes are especially high in the Senate, where Democrats barely have a majority based on the tiebreaker rules, making Manchin’s opposition even more potent.
On CNN’s “State of the Union” show, Manchin reiterated his general concern about the sum of $ 3.5tn in tax and spending measures that could deepen the deficit and worsen the country’s problems with inflation. Echoing his opinion piece in the Wall Street Journal earlier this month, he called on Democrats to halt his legislative proposal.
Party leaders have rejected those calls, including Senate Majority Leader Charles E. Schumer, Democrat of New York, who said last week that the House is “racing forward” in hopes of passing. the final proposal before the end of the month. When asked about that schedule, Manchin fired back, telling CNN, “that’s fine, he can, but he’s not going to get my vote” for a $ 3.5tn package, adding, “Chuck knows that.”
Manchin on Sunday revealed some of his views on the project, raising new objections against some of the Democrats’ top priorities.
He first took aim against the party’s efforts to extend the child tax credit, a program Democrats bolstered through the latest economic stimulus measures. Manchin advocates for additional rules in the program that limit the child tax credit by making it only available to low-income families, adding that the benefit should be tied to work requirements – an idea most oppose. Liberals in the party. “I support the child tax credit,” he began, but “let’s see how we’re doing. We’re going to make sure it’s reaching the right people. “
“There is no type of labor requirement. There is no educational requirement whatsoever to learn new tools, ”Manchin continued. “Don’t you think that if they want to help children, people have to make some kind of effort?”
On the climate side, on the other hand, Manchin also fired at one of the Democrats’ flagship proposals to cut emissions – a program that would pay energy providers using clean sources in time that would penalize those who continue to pollute. Some party lawmakers say the program is essential to achieving Biden’s proposed goal of cutting greenhouse gas emissions in half by 2030. However, Manchin, whose state relies heavily on the coal industry, the effort seems unnecessary.
“The transition is happening. Now we want to pay companies for what they are already doing, “he said. “It doesn’t make any sense to me that we take billions of dollars and pay power companies for what they are already doing in a market in transition.”
Manchin’s calls to reduce the size of the package sparked Sanders’ condemnation in a subsequent interview on CNN.
“It’s absolutely unacceptable to me, and I don’t think it’s acceptable to the president, or to the American people, or to the vast majority of the Democratic caucus,” Sanders said. “I believe that we are all going to sit down and work together to come up with a $ 3.5tn budget reconciliation bill, which will address the huge unmet needs of working families.”
Sanders addressed the package’s overall goals to lower the price of prescription drugs, expand Medicare benefits, and combat challenges like climate change. He emphasized that many Democrats have already relented on their proposals reaching a $ 3.5tn figure, after Sanders and his allies initially sought a $ 6tn package.
And Sanders drew attention to what is politically at stake in all of this, pointing to the fact that Democrats have tied their tax and spending measures to another effort, of about $ 1tn, to improve the nation’s infrastructure. Liberal lawmakers have said they will not support the measure unless the most robust economic package is passed.
“It would be a really sorry scenario for the American people and for Congress if both bills fail,” he said.
Authors Information:
Tony Romm is a Washington Post reporter for economic policy in Congress.
Jeff Stein is the Washington Post’s reporter for economic policy in the White House. He was a crime reporter for the Syracuse Post-Standard and, in 2014, founded the non-profit local news organization “Ithaca Voice” in upstate New York. He was also a reporter for Vox.
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