It has been months since President Biden announced his plans for his $3.5 trillion spending bill. The legislation has gone through some hiccups, and some things are still left to be sorted out.
One of the issues the bill is facing is how it will be paid for. Democrats have proposed tax hikes that will cover the cost of the new bill.
However, in-house fighting among the Democrats over the cost of the bill, the content of the bill, and how to pay for the bill have led to the president cutting down the legislation. He’s now proposing a $2 trillion bill.
Let’s take a look at the party’s menu of tax hikes across the board.
Tax Rates: Agreed and Dropped
In 2017, the GOP lowered the corporate tax rate from 35% to 21%. However, the Biden administration was planning to increase the rate to 28%. It was then met with heavy backlash and opposition from business groups.
Senator Manchin also revealed he would only agree to a 25% tax rate. In light of this, Democrats on the House Ways and Means Committee voted last month on the rate, and they reached a 26.5% compromise.
However, the party’s hopes for a corporate tax hike were shattered by Senator Sinema. She said she isn’t willing to agree to a corporate tax hike. Aside from that, President Biden also revealed during his town hall event Senator Sinema won’t compromise on any tax hike.
Democrats’ tax plan is in flux and the corporate tax hike, previously thought to be a sure thing, is now in jeopardy. @ylanmui reports on what’s in and what’s out: pic.twitter.com/BNGDqcH5dE
— Squawk Box (@SquawkCNBC) October 21, 2021
Income tax is also another way Democrats planned to raise funds needed for Biden’s bill. The Biden administration proposed increasing the top marginal tax rate for individuals earning over $400,000 a year.
The previous rate was 37%, and they plan to increase it to 39.6% per annum. The rate will also apply to couples filing their taxes together and earning $450,000 every year.
By increasing the rate by 2.5%, the White House will be raising up to $170 billion in the next ten years. Senator Manchin agreed to this proposal. However, Senator Sinema again refused any hike in taxes on individual income. In light of this, the Democrats will not be going through with this plan.
Capital gains tax for top earners were also not left out from the tax hike plan of the Biden administration. They considered increasing the capital gain rate for the highest earners to 39.6% from 20%.
Aside from that, people making over $1 million would also face a federal rate of close to 43.4% when considering the existing Obamacare surtax. After much considerations, the House Ways and Means Committee decided to reduce the rate to 28%. Senator Manchin agreed to this new rate.
Uncertainty Over Tax Hike Agreements
Democrats need to agree on the tax hike plans before they can move forward with the bill. Major opponents to the numerous tax hikes are Senator Manchin and Senator Sinema.
However, one way the administration is looking to raise money for the bill is by taxing billionaires. Senator Manchin and Senator Sinema are on board with this, subject to more information.
NEW: Senior Dems now racing to finalize plan to massively increase taxes on America’s ~700 billionaires
Widespread belief among top Ds that Sinema DOES SUPPORT new billionaire tax *despite opposing any hike to corporate tax rate*
Wild twists here, folkshttps://t.co/jFHyEbwHjr
— Jeff Stein (@JStein_WaPo) October 22, 2021
The billionaire tax proposal will see higher taxes for those with $1 billion in wealth. House Speaker Nancy Pelosi revealed the high tax for billionaires is likely to raise between $200 billion and $250 trillion over the next ten years.
With Sinema and Manchin potentially on board with this, we’ll have to wait for more details and how it will affect the spending bill.