House Democrats set to propose increase in corporate tax rate to 26.5%


House Democrats plan to propose to raise the corporate tax rate to 26.5% from 21% and impose a 3 percentage point surtax on individual incomes above $ 5 million, according to two Democratic House advisers familiar with the plans.

The tax increases would be part of the House Ways and Means Committee’s plans to fund party priorities in a fast moving budget bill. These elements include an expanded child tax credit, a national paid vacation program, and tax breaks for renewable energy.

House Democrats are also considering raising the minimum foreign income tax on U.S. corporations to 16.5% from 10.5% and increasing the capital gains tax rate to 23.8 % to 28.8%. Lawmakers are also expected to fundraise by expanding the application of the Internal Revenue Service and could include other tax increases on corporations and high-income individuals.

READ Bitcoin bulls slam Bill Biden as crypto tax at stake in Washington

So far, House Democrats have been coy about their tax hike plans as they tried to navigate moderates worried about the economic impact of tax hikes and progressives keen to tax people. wealthy and broaden the social safety net. Representative Richard Neal (D, Massachusetts), the committee chair, said detailing tax hike plans too early can give the opposition too much time to build.

The plans, aimed at a Ways and Means Committee vote later this week, will face challenges as Democrats try to determine how far they are willing to go to reverse 2017 tax cuts and impose charges more burdensome to businesses and high-income households.

Some Senate Democrats, including Joe Manchin of West Virginia and Mark Warner of Virginia, have said they don’t want to raise the corporate tax rate above 25% from the current 21%. The Biden administration and Democrats such as Senate Finance Committee Chairman Ron Wyden of Oregon have argued for much more aggressive capital gains tax increases than Congressional Democrats are. ready to support.

Andrew Bates, a White House spokesman, praised the committee’s ideas and said the administration looked forward to working with lawmakers.

“It fulfills two fundamental goals that the President laid out at the start of this process – it does not raise taxes for Americans earning less than $ 400,000 and it repeals the fundamentals of Trump’s tax freebies for the rich and corporations who have done nothing to strengthen our economic health in the country, ”he said on September 12.

The committee has yet to release details of its proposed changes, the effective dates for each provision, or estimates of how much money each coin would raise. The proposals could change dramatically as lawmakers debate and vote on them.

On Sunday, tax lobbyists and congressional advisers were circulating a four-page document that roughly explains how Democrats would get $ 3.5 billion to pay their spending and tax cuts over a decade.

The document does not say how much of a definitive plan this is or whether Democratic lawmakers have accepted it. By showing the scale of the tax increases needed to meet this budget target, the document could prompt lawmakers to reduce their targets or issue debt to cover part of the costs.

It includes $ 1 billion in personal tax increases, $ 900 billion on businesses, $ 700 billion from drug pricing policy changes and $ 120 billion from tighter tax enforcement. . Adding various other changes and assuming that the economy grows to $ 3.5 billion.

Democrats have a narrow path. They cannot lose more than three votes in the House and none in the Senate, and lawmakers such as Manchin are aiming to reduce the bill from the $ 3.5 billion target set by Democratic leaders.

Democrats broadly agree that they are prepared to raise the corporate tax rate and the top personal tax rate. But other areas, particularly capital gains and international tax rules, have proven to be more difficult.

The Biden administration’s capital gains plan has faced sustained opposition from rural Democrats. The administrative plan would impose taxes on unrealized gains on death, with an exemption of $ 1 million per person and special rules to protect farms and family businesses. Under the Biden plan, the top tax rate would rise to 43.4%, the same as ordinary income.

But those protections have not swayed lawmakers in rural areas, despite the Biden administration’s arguments that the previous change would allow billionaires to evade income tax on their earnings upon death. Under current law, people who died with unrealized gains could owe inheritance taxes, but not income taxes. Their heirs pay income tax only when they sell and only on gains made since the previous owner’s death.

In the paper circulating on Sunday, those changes other than a smaller increase in the capital gains rate are not included.

As noted in the paper, high-income households would face a series of tax increases. The maximum rate would drop from 37% to 39.6%, with the upper bracket starting at $ 400,000 for individuals and $ 450,000 for married couples. These thresholds are lower than what the Biden administration has proposed.

The committee could also cut tax relief for businesses that pay their taxes on their owners’ individual tax returns. These corporations, such as partnerships and S corporations, would face caps on a deduction they obtained in the 2017 tax law.

READ Bidenomics draws on the best of California’s innovation strategy

According to the document, many business owners would also start facing a 3.8% tax on their profits. Currently, a tax at this rate applies to the wages of high-income people and passive income, but the profits of active businesses are exempt. The proposal, like the administration’s plan, would impose this 3.8% tax on high-income business owners.

The combination of these changes would mean that some taxpayers could face a maximum marginal federal income tax rate of 46.4%.

The document also presents other changes. Increases to the inheritance tax exemption that expire after 2025 would now end on December 31. Tobacco taxes would increase. Companies would face stricter limits on the deduction of executive compensation, and private equity fund managers would face limits on their ability to tax their deferred profits as capital gains.

The document does not mention any modification of the national and local tax deduction. Raising or repealing the $ 10,000 cap on the deduction is a priority for many Democrats. It also doesn’t mention the Biden administration’s proposal to require banks and other financial institutions to report annual account flows to the IRS.

Kristina Peterson and Andrew Duehren contributed to this article.

This article was published by The Wall Street Journal.


Source link

Previous House Democrats set 26.5% corporate tax rate to fund Biden's budget
Next Banorte and Republic Bank have the recipe for solid success in corporate governance at the Ethical Boardroom Awards