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On Monday, House Democrats released their latest proposal to increase taxes on American individuals and businesses. While the plan includes a wide variety of massive tax increases, it nevertheless does not look to be as economically damaging as the plan previously proposed by President Joe Biden.
Among the House Dems’ proposed tax hikes:
- A top corporate income tax rate of 26.5% (compared to the current 21% rate);
- A capital gains tax rate of 25% (compared to the current 20% rate);
- A top personal income tax rate of 39.6% (compared to the current 37%);
- A 3% “surcharge” on individual income above $5 million;
- As well various other proposals to raise new revenue, including a limitation of the QSBS (Qualified Small Business Stock) gain exclusion.
The 3% surcharge on individuals is likely an attempt to shoehorn in a revenue source that functions like a “wealth tax,” but which isn’t specifically defined as such. House Democrats were ostensibly nervous to introduce a “wealth tax” without relabeling it as a term that is more politically palatable.
President Biden had previously proposed a corporate tax rate of 28%, and a capital gains tax rate of 39.6%. But the House Democrats’ slightly slimmed-down proposal likely comes closer to winning the approval of moderate Democrats in the House. Any tax hike package would also require the approval of key swing senators including Sen. Kyrsten Sinema and Sen. Joe Manchin, who have to date not been enthused by various progressive plans to fundamentally transform the size and scope of the federal government.
The tax plans could change later this month as House Democrats attempt to craft and pass a final bill. The Ways and Means Committee is scheduled to continue work on the massive spending package this week, where tax policy will likely be debated as well.
To pass any legislation, the Democrats cannot afford to lose more than a few House representatives, and they cannot lose a single vote in the Senate, so both packages currently hang by a thread. But some progressive Democrats attempted to convey continued confidence in the bills.
Senator Bernie Sanders appeared on CNN where he highlighted what he believes are the popular aspects of the proposed spending spree. “I believe we’re going to all sit down and work together and come up with a $3.5 trillion reconciliation bill, which deals with the enormously unmet needs of working families,” said Sen. Sanders.