As they struggle to trim the size of their “reconciliation” plan, Democrats are poised to propose increased taxes on the wealthy worth hundreds of billions.
Everyone is Happy, Except the Far Left
That’s great news for centrists who are wary of rising interest rates. However, it could be bad news for leftists who want to punish the wealthy.
Many leftists see this as their greatest chance in years to enact big changes in how affluent individuals are taxed, such as a plan to tax billionaires’ unrecognized investment income for the first time.
If liberals unexpectedly don’t need such contentious initiatives to balance their plan, the temptation on legislators to take them up will lessen.
Some liberals agree when the demand for income decreases, some of the most extreme tax policies may fall by the wayside; however, they warn Democrats against abandoning promises to tax the ultra-wealthy.
The version of the reconciliation bill passed by the House Budget Committee on Sept. 25 would restore diversity visas lost to COVID-19 and Trump’s travel ban. pic.twitter.com/wGqCg5mWbm
— Christina van Waasbergen (@cvanwaasbergen) October 4, 2021
“We’re going to make noise, we’re not going to be happy,” said Frank Clemente, the president of Americans for Tax Fairness, a group that advocates for greater taxes on the rich.
It’s the polar opposite of the liberals’ decision to cut expenditure. Much of the attention in Washington was on how they plan to thin down their bundle by eliminating lower priority projects or supporting more initiatives for shorter durations with the expectation Congress will re-up them afterwards.
However, a lower price tag will result in significant tax adjustments, as Democrats are reluctant to raise taxes much higher than necessary to cover the cost of their programs.
It’s Not Over Yet
Legislators are still wrangling over the total dimensions of their deal, with President Biden predicting it will be in the $2 trillion range, lower than the $3.5 trillion many progressives had hoped for.
Democrat Sen. Joe Manchin, a prominent centrist, maintained on Wednesday he will not go past $1.5 trillion. Most liberals should be able to raise $1.5 trillion in taxes to finance such spending.
This would be the case, given the similarity between Manchin’s current proposal and the House Ways and Means Panel’s tax plan passed last month.
Why are no reporters asking @jontester what he thinks about Biden’s “budget” reconciliation bill? Do Montanans support bypassing the filibuster to adopt party-line socialism, middle class tax hikes, mass migration & history’s biggest amnesty during history’s worst border crisis?
— Stephen Miller (@StephenM) October 5, 2021
Manchin proposes to increase the corporate tax rate to 25%, which would yield $400 billion. Ways and Means aim to boost it to 26.5%, which would bring $540 billion.
Both Manchin, as well as Ways and Means, propose raising the highest capital gains rate to 25%, generating an additional $125 billion in revenue. Raising the highest marginal tax rate to 39.6% (as it was before the conservative tax cuts of 2017) would generate $170 billion.
Increasing tax administration by beefing up the IRS might result in savings of $200 billion. Liberals would almost certainly consider hundreds of billions of dollars in savings from so-called dynamic scoring, as well as billions more in healthcare reductions.
They also seem set to tighten tax laws on international businesses’ overseas profits, which would generate $300 billion under House Democrats’ plan.
Continuing a rule passed by Democrats previously this year that makes it more difficult for pass-through company owners to deduct losses from their income would still save $167 billion.
