Biden turns to taxes on corporations, millionaires to pay agenda

The plan relies on a 15% corporate minimum tax, a surcharge on the highest earners, tougher tax enforcement, and higher taxes on foreign income of American companies.

Meanwhile, ideas that once seemed like a clear consensus within the party — such as raising the 21% corporate tax rate set by Republicans four years ago — were put aside. Progressives had hoped that unified democratic control of government could change how the capital gains of the wealthiest Americans were taxed. Administration officials pressured banks to report annual account flows to the Internal Revenue Service to improve enforcement. House Democrats had planned to tighten the property tax and roll back Trump-era tax cuts for closely held businesses.

At the moment nothing like this is happening.

Instead, Democrats are leaning on more IRS staffing, the corporate minimum tax, a new 1% tax on stock buybacks and a surcharge on people earning more than $10 million and $25 million a year—the top 0.02% earners, according to the administration. . They say they should generate enough money to pay for their old agenda, which includes climate change initiatives and preschool programs.

Essentially, Democrats took the broad collection of tax ideas they’d been developing over the years, ran them through multiple filters, and proceeded with a mix of policies that avoided those obstacles.

First, he navigated around Mr Biden’s own campaign pledge, that taxes on households earning less than $400,000 would not increase, a promise that does not include the effects of corporate taxes on middle-income workers and shareholders. Second, they were battling resistance from House Democrats, such as a tax on billionaires’ unrealized gains proposed this week by Sen. Ron Wyden (D., Ore.). And, more importantly, he negotiated for weeks with moderate censors Joe Manchin (d., w.va.) and Kirsten Cinemas (d., Ariz.), who objected to the different proposals for different reasons. Expressed. Republicans are united in their opposition.

The resulting revenue increased by 3.6% this summer by the Congressional Budget Office projected by the government to be collected over the next decade. The plans will generate wealth from corporations and high-income households, but they will do little to tax the wealthy who do not sell their assets and thus do not report much taxable income. The financial-services industry’s lobbying campaign helped stop the IRS bank-reporting proposal.

Even the scaled-back plan would mean some sharp tax increases for American companies and high-income households. In addition to the 15% corporate minimum tax, the plan would also impose a 15% minimum tax on foreign income of U.S. companies as part of a U.S. contribution to international deal signed by Treasury Secretary Janet Yellen to boost minimum taxes. World. The scheme will also expand the 3.8% tax on high-income households so that owners of close-knit businesses can pay it.

The surcharge on the number of households making more than $25 million would take the highest ordinary-income tax rate to at least 45%, the highest since 1986. And the top capital-gains tax rate will jump to 31.8%, the highest among those over 40. years.

And for all that, it’s still unclear whether the framework announced on Thursday will be the same as what Congress gets through. It needs to be turned into final legislative language, evaluated by nonpartisan Congressional scorekeepers and accepted by all Senate Democrats and nearly everyone in the House.

The scheme also includes tax deduction. This includes expanding the earned-income tax credit and incentives for electric vehicles and renewable energy generation. It would extend the Extended Child Tax Credit through 2022, providing a total monthly payment of $3,000 per child and $3,600 for children under the age of 6. Child Credit will be fully refundable permanently, which means poor families can get money, no matter how little they earn.

A senior White House official said the framework includes spending on child care, but does not include the expanded child and dependent care tax credits.

Mr. Biden’s outline is a high-level outline. This does not include every tax provision that may end up in law that has not yet been written down and fulfilled. Items missed from the summary may still end up in the final bill.

Specifically, it does not mention the $10,000 limit on state and local deductions. Lawmakers in New York and New Jersey expect some changes to the final bill. One option under discussion would be to repeal the cap for 2022 and 2023 and restore it for 2026 and 2027. This won’t have a significant impact on the overall size of the bill, but it will offer a huge tax cut in the near term for high-income households. in high tax states.

The framework also relies on some optimistic estimates of how much money can be generated. For example, it claims that the government can collect $400 billion in a decade by doubling the size of the IRS. This is a Treasury Department figure that includes both direct and indirect effects. The Congressional Budget Office pegged the total at less than half of last month.