Here are six things you should know about the plan.
No wealth tax
The US has an income tax system, not a wealth tax system, as advocated by Senator Elizabeth Warren (D-Mass.), And that will not change under the House Democratic proposal. With only a tiny majority in the chamber and at the mercy of the moderates, the Democrats are focused on increasing existing income taxes for the rich rather than making more controversial proposals to pursue accumulated wealth.
Her plan would raise the upper marginal income tax rate from 37 percent to 39.6 percent; Impose a new 3 percent surcharge on those earning more than $ 5 million; and, among other things, raise the capital gains ratio from 23.8 percent to 28.3 percent.
On display are proposals such as one of the Biden government, which aim to enable the wealthy to pass on wealth to heirs tax-free. Few defend the “reinforced death base” provisions that the government seeks to curtail, but it has politically powerful proponents like farmers, and curbing tax breaks has always been a long road.
All of this is good news for the super-rich like Jeff Bezos, who don’t make their living with big salaries but because they own companies that become extremely valuable. The Democrats are proposing to tighten one type of property tax: inheritance tax, by cutting the couples allowance by nearly half to $ 6 million and making other changes.
Companies would pay a lot and reverse their 2017 profits
The Republicans are known to have lowered the tax rate from 35 percent to 21 percent under the Tax Cuts and Jobs Act. At the same time, however, they also introduced new taxes on the foreign profits of large companies. The net effect was that the big business received a planned tax cut of $ 330 billion, according to impartial rapporteurs to Congress.
The Democrats are not proposing to completely reverse the corporate rate cut – they would bring it back to 26.5 percent. But they are also increasing the taxes Republicans have levied on multinational corporations’ foreign profits, and adding a few others. The combined result, according to official estimates, is a $ 963 billion corporate tax hike – what companies are complaining is almost three times the tax cuts they received in 2017.
That would come as corporate tax revenues that slumped after the TCJA are now picking up again thanks to higher profits. Company payments are projected to be $ 268 billion this year, not too far off the $ 297 billion they paid the year before the Republican tax cuts went into effect.
Democrats would say that these official estimates understated how much business got out of the TCJA because it included tax increases that would later likely be reversed by Congress. And many don’t believe that companies paid their fair share before the GOP cuts.
Democrats also cut taxes
Your tax hikes are getting everyone’s attention, but the Democrats also want a lot of taxes to be cut. They want to expand their new monthly child tax credit disbursement program and make a recent income tax credit expansion permanent (although some of those increases are technically considered an expense, not tax cuts).
They have a long list of clean energy tax breaks, including big new subsidies for buying electric cars, trucks, and bicycles, along with a variety of regulations to promote affordable housing, support state governments, and subsidize childcare wages, for example .
Some of the proposed cuts are surprising. Ways and Means Chairman Richard Neal (D-Mass.) Plans to create a new deduction for union members by allowing them to write off up to $ 250 in dues. And he has a proposal to secure the wages of local news reporters, with a special wage tax break for their publishers.
Leave the SALT debate to the superiors
Neal’s plan doesn’t address what to do with the $ 10,000 cap on state and local Republican tax deductions in 2017, nor does his committee have any plans to address it. Instead, he introduces the issue of Pelosi, which will deal with it after Ways and Means approves the rest of the legislation.
The issue has deeply divided Democrats, with lawmakers from high-taxing states calling for its repeal and others pale on cutting a tax that would primarily benefit the rich – and messing up Democrats’ message to soak the rich.
Pelosi is unlikely to come up with a plan to resolve the cap until shortly before the downfall of the entire spending and tax plan, leaving little time for debate. It could also mean adding some surprise last-minute payments to cover the cost of whatever it decides.
Easing or removing the cap is expensive and can cost hundreds of billions of dollars. A Pelosi spokesman said: “As work continues between the House, Senate and White House on this and other unfinished but critical points, the fixation of the Republican SALT cap attack on progressive state and local governments remains absolute a priority for House Democrats in the final reconciliation package. “
Many disputes with the Senate threaten
Democrats in the two chambers have been working behind closed doors to narrow their differences in hopes of speeding up the trial, but it is clear that fighting will break out on several fronts. Senate finance chairman Ron Wyden (D-Ore.), For example, wants to do a lot more for the billionaires’ fortunes and proposes, among other things, an annual tax on their unrealized stock gains.
Under pressure from the moderates, Neal is doing easier than Wyden or the Treasury Department would like to see foreign profits from multinational corporations.
Many of Neal’s colleagues in the House of Representatives are unhappy with the government’s proposal to raise taxes on US multinationals more than what other countries are asking as part of the global minimum tax demand. Wyden also wants to impose other taxes on companies, such as a new levy on share buybacks.
The two tax recorders also know what to do with a jumble of energy tax regulations. Neal wants to greatly expand the existing provisions, while Wyden wants to consolidate more than 40 specialized fractions into a few technology-neutral provisions.
But Wyden’s ambitions will run into obstacles even from moderates in its own chamber, viz Manchin and Senator Kyrsten Sinema from Arizona.
Some surprises from Neal
It’s fair to say that Neal isn’t the darling of the left. Many progressives felt that his heart never lay in following former President Donald Trump’s tax returns and also questioned his obligation to raise taxes. Neal himself left much room for such speculation, suspending the demands of other Democratic leaders for higher taxes on the rich and saying little about his own plans.
In his defense, Neal said he was less interested in giving tax seminars than trying to figure out what combination of tax increases could cover the Democrats’ costs while actually getting through the house where Democrats can only afford three votes can.
But its $ 2 trillion tax hike is bigger than many expected and, combined with other savings from increased IRS enforcement, gives the Democrats a perfectly plausible plan to pay off $ 3.5 trillion in new expenses in full. And that could be effective Reply to moderates like Manchin who have raised concerns about the cost of the Democrats’ spending plans.