The U.S. CongressPresident Democrats on Monday unveiled a sweeping proposal for tax hikes on big corporations and the wealthy to fund President Joe Biden’s $3.5 trillion rebuilding plan.
The Democrats proposed 39.6% tax rate on individuals earning more than $400,000, or $450,000 for couples, and there would be a 3% tax on wealthier Americans with adjusted income beyond $5 million a year.
For big businesses, the proposal would raise the corporate tax rate from 21% to 26.5% on incomes beyond $5 million, representing a slight reduction of 3% from the 28% rate the president had sought.
As it were, the tax hikes are in line with President Biden’s own proposals and are expected to bring about significant changes in the tax code since Republicans with then-President Donald Trump slashed taxes in 2017.
A cursory appraisal of the tax proposal indicated that Biden’s government may potentially raise about $2.9 trillion which would go a long way toward paying for the $3.5 trillion legislation and will be counting on long-term economic growth from the plan to generate an additional $600 billion to make up the balance.
The White House projected that substantial part of the revenue raised would come from the higher taxes on corporations and the highest earners, increasing the individual tax rate to 39.6% from the current 37%.
For the wealthy individuals, the Ways and Means Committee is proposing a hike in the top tax rate on capital gains for those earning $400,000 a year or more, to 25% from the current 20% while exemptions for estate taxes, which were doubled under the 2017 Trump tax law to now $11.7 million for individuals, will revert to $5 million.
Other proposals comprise of increases in the tax rate on tobacco products and a new tax on non-tobacco nicotine delivered by e-cigarettes.
Analysts believe that businesses and anti-tax groups will oppose Biden’s latest fiscal proposals but also feel that Democrats will push for the passage as legislation.
Already, the chairman of the Ways & Means Committee which is packaging the tax review bill, Rep. Richard Neal, explained that the proposals, taken together, would “expand opportunity for the American people and support our efforts to build a healthier, more prosperous future.”
But then, analysts are concerned that getting the proposal sailing through the legislative process may be tough for Biden and his allies in Congress as the massive fiscal package is seen as one of the largest single domestic policy measures proposed by any US government in decades.
The “Build Back Better” agenda primarily targets spending on child care, health care, education and strategies to confront climate change.
Republican lawmakers have expressed their opposition to the Biden’s ambitious plan and suggested that it should be packaged towards Western European-style socialism.
This is even as they particularly rejected the taxes required to pay for it, basing their opposition on the grounds that the approval would reverse the GOP tax cuts approved just a few years ago.
In his remarks, Senate Republican leader, Mitch McConnell, said the proposal is “the last thing American families need.”
Despite their opposition to the proposal, Republicans appear not strong enough to stall the debates on it as Democrats rely on a budget process that will allow them to approve the proposals on their own, subject to their capacity to muster a slight majority of votes in Congress.
For now, Democratic congressional leaders have set Wednesday target for committees to draft the proposal bill.
Meanwhile, the White House welcomed the preliminary tax plan, which keeps to Biden’s promise not to tax anyone making less than $400,000.
In his remarks on the fiscal plan, deputy press secretary, Andrew Bates, said the proposal “makes significant progress towards ensuring our economy rewards work and not just wealth.”
The House, Senate and White House are working together to align their plans ahead of this month’s deadlines, though some differences are emerging that will need to be resolved.