House Democrats unveil plan to raise taxes on Amazon, Microsoft, and other wealthy corporations and Americans making over $5 million
- House Democrats unveiled their plan to raise taxes on the wealthiest Americans and corporations.
- It includes a 3% surtax on Americans making over $5 million and a corporate tax hike to 26.5%.
- A capital gains tax rate increase to 25% is also included. They're all smaller than what Biden proposed.
As debate on Democrats' $3.5 trillion social spending bill moves forward, House Democrats unveiled a plan on Monday to raise taxes on the wealthiest corporations and wealthiest Americans in an effort to generate $2.9 trillion in new revenue to finance their sprawling package.
On Monday, Democrats on the House Ways and Means Committee circulated a draft of its tax proposals for the nascent reconciliation plan. They aim to approve it along party-lines without any Republican support because the reconciliation process only requires a simple majority vote.
It includes a 3% surtax on individuals with incomes over $5 million, similar to ideas Massachusetts Sen. Elizabeth Warren has been pushing for years. Warren's Ultra-Millionaire Tax Act would place a 2% tax on households with a net worth of $50 million to $1 billion, but that is unlike the Ways and Means draft because it would assess net worth, whereas the draft proposes a tax on incomes. That's a key difference in it being an arguably unconstitutional "wealth tax."
Also, while the committee's plan aligns with Biden's goals to ensure the wealthy pay their fair share, it differs from his proposals in three key ways:
- A corporate tax hike to 26.5% that would only apply to firms earning more than $5 million, like Amazon and Microsoft, and smaller businesses, with "incomes" below $400,000, would see their rate fall to 18%;
- An increase on the capital gains rate - which taxes profits from assets like stocks and bonds - from around 20% to 25%;
- And an omission of a capital gains tax at death, which Biden had proposed to tax the unsold assets of wealthy descendant at the owner's death.
Biden proposed a 28% corporate tax hike, along with a plan to nearly double the capital gains tax rate to as high as 43.4%. However, the Democrats' increase targets a wider group and spares those earning below $400,000, aligning with Biden's tax pledge not to raise taxes on middle-class Americans. The White House had previously said a capital gains hike would only apply to individuals making over $1 million a year.
Another key element in the Ways and Means draft is an increase of the top individual tax rate from 37% to 39.6% on Americans who individually earn over $400,000. For the most part, this aligns closely with Biden's plans, but he had proposed raising the top rate for households earning over $400,000, meaning it would have hit couples that individually earned $200,000 or so. The new policy would also increase the top rate for married couples who earn over $450,000 jointly, starting in 2022.
The committee will continue marking up these proposals on Tuesday and Wednesday.
"We seek to help families better afford essentials with the continuation of the expanded Child Tax Credit and investments that will lower the cost of prescriptions and health insurance premiums," Ways and Means Committee Chair Richard Neal said in a statement. "And we can do all this while responsibly funding our plans."
Given that these proposals are more modest that what Biden wanted, they may face an easier path getting approval from moderate Democrats like Sen. Joe Manchin, although on a Sunday TV appearance he seemed to favor raising between just $1 trillion and $1.5 trillion in revenue from tax increases.
The richest corporations likely won't approve of any plan that entails a tax hike - they're lobbying Congress to get those hikes removed from the reconciliation bill altogether.
Biden has not yet commented on the Democrats' tax proposals, and tHouse Democrats will continue debate on elements of the reconciliation plan this week. Their focus is starting to turn to assembling a party-line plan that can garner the support of all 50 Senate Democrats, including Manchin and Sen. Kyrsten Sinema, a pair of key centrists.