Shipping News and Reviews

House Democrats are proposing new tax hikes to pay their $ 3.5 trillion bill: here are the details

House Spokeswoman Nancy Pelosi and House Ways and Means Committee Chair Richard Neal (L), Democrat of Massachusetts, speak on the U.S.-Mexico-Canada Accord, known as the USMCA, on Capitol Hill in Washington, DC, Jan. December 2019.

Saul Loeb | AFP | Getty Images

House Democrats on Monday outlined a series of tax hikes for businesses and wealthy people to fund a social safety net and climate policy investment that could reach $ 3.5 trillion

The plan provides top tax rates for corporations and individuals of 26.5% and 39.6%, respectively, according to a summary published by the Tax Committee for Ways and Means. The proposal provides a 3% surcharge on individual income over $ 5 million and a capital gains tax of 25%.

It is unclear how much the tax hikes would bring and whether the new revenue would offset the full investment in social programs. The Democrats may end up cutting the price of the legislation as the centrists balk at $ 3.5 trillion in total.

The tax proposals could change before Democrats draft the final bill, which they plan to pass in the coming weeks. The Ways and Means Committee will discuss tax policy when it resumes its premium on the mammoth spending package this week.

CNBC policy

Read more about CNBC's political coverage:

The Senate Democrats will also have their say on the tax proposals. Senator Joe Manchin, D-W.V., Has called for a corporate tax rate of 25%, which is lower than that favored by the House Democrats. He has also raised concerns that the plan is adding to budget deficits.

The party will need votes from every member of the Senate Democratic faction and all but three Democrats in the House of Representatives. Senate Majority Leader Chuck Schumer, D-N.Y., And House Speaker Nancy Pelosi, D-California want to get the bill through the budget balancing process without Republican support.

The House of Representatives tax plan would not go as far as President Joe Biden had originally hoped. The president had asked for a corporate income tax of 28% and a capital gains rate of 39.6%.

Biden has promised not to collect taxes on anyone who earns less than $ 400,000 a year.

The House of Representatives proposal would take big strides to reverse the 2017 Republican tax cuts. It would raise the corporate rate to 26.5% after the GOP cut it from 35% to 21%.

The Democrats would also restore the highest individual rate to 39.6% after the Republicans lowered it to 37%.

The GOP has spoken out against the democratic plan in part because of the proposed changes to the 2017 law. The Republicans would also not reverse any of the cuts made under the bipartisan infrastructure bill passed by the Senate.

Under the House Democratic plan, the highest corporate tax rate would apply to income over $ 5 million. The first $ 400,000 in income would be taxed at a rate of 18%.

A rate of 21% would apply to corporate incomes between $ 400,000 and $ 5 million.

The plan would invest nearly $ 79 billion in IRS tax enforcement to increase revenue.

It would increase taxes on certain tobacco products. The proposal would also change or reduce certain deductions for individuals and high income businesses in order to raise funds.

The committee's draft does not include a proposal to increase the $ 10,000 cap on state and local tax deductions under the GOP law. A handful of Democrats from blue high-tax countries like New Jersey and New York have announced that they will oppose a reconciliation law that does not increase the deduction limit.

The Democrats plan to use the new proceeds to fund the expansion of childcare, paid vacation, preschool education, community college, public health insurance, household tax credits, and green energy incentives, among other things.

Subscribe to CNBC on YouTube.

Comments are closed.