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Billionaires tax hits opposition as Biden pushes for budget deal

Sen. Joe Manchin III holds a pair of glasses
Sen. Joe Manchin III (D-W.Va.), a key holdout vote on President Biden’s domestic agenda, chairs a Senate committee meeting.
(J. Scott Applewhite / Associated Press)

The Democrats’ idea for a new tax on billionaires to help pay for President Biden’s social services and climate change plan quickly ran into criticism as too cumbersome, with some lawmakers preferring the original plan of simply raising the top tax rates on corporations and the wealthy.

Biden said Monday he was hopeful that the talks with Congress could wrap up overall agreement on the package this week. It’s amounting to at least $1.75 trillion and could still be more. Biden said it would be “very, very positive to get it done” before he departs for two overseas global summits.

“That’s my hope,” the president said before leaving his home state of Delaware for a trip to New Jersey to highlight the child-care proposals in the package and a related infrastructure measure. “With the grace of God and the goodwill of the neighbors.”

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Resolving the revenue side is key as the Democrats scale back what had been a $3.5-trillion plan, insisting all the new spending will be fully paid for and not pile on to the debt. Biden vows that any new taxes would hit only the wealthy, those earning more than $400,000 a year, or $450,000 for couples.

The White House had to rethink its tax strategy after one key Democrat, Sen. Kyrsten Sinema (D-Ariz.), objected to her party’s initial proposal to raise tax rates on wealthy Americans by undoing the Trump-era tax cuts on those earning beyond $400,000. Sinema also opposed lifting the 21% corporate tax rate. With a 50-50 Senate, Biden has no votes to spare in his party.

Instead, to win over Sinema and others, the White House has been floating a new idea of taxing the assets of billionaires and another that would require corporations to pay a 15% minimum tax, regardless of whether they show any profits. Those both appear to be gaining traction with another pivotal Democrat, Sen. Joe Manchin (D-W.Va.), who told reporters he supported new ways to ensure that the wealthy pay their “fair share.”

Democrats on the Senate Finance Committee, led by Sen. Ron Wyden of Oregon, are prepared to roll out the tax revenue plan in a matter of days. It is likely to include other revenue-raising tax measures, including a plan to beef up the IRS to go after tax scofflaws.

“Here’s the heart of it: Americans read over the last few months that billionaires were paying little or no taxes for years on end,” Wyden said at the Capitol.

The $2.8-trillion U.S. budget deficit for 2021 is an improvement from the record high of $3.1 trillion in 2020.

The billionaires tax is being modeled on a 2019 bill from Wyden to treat assets as income. Another idea, a surtax of up to 3% on the ultra-rich, has been proposed by Sen. Elizabeth Warren (D-Mass.).

Under Wyden’s emerging plan, the billionaires tax would hit the wealthiest of Americans, fewer than 1,000 people. It would require those with assets of more than $1 billion, or income of $100 million for three consecutive years, to pay taxes on gains on stocks and other tradable assets, rather than waiting until holdings are sold.

A similar billionaires tax would be applied to non-tradable assets, including real estate, but it would be deferred with the tax not assessed until the asset was sold.

Overall, the billionaires tax rate has not been set, but it is expected to be at least 20%, the capital gains rate. Democrats have said it could raise $200 billion in revenue that could help fund Biden’s package over 10 years.

Senate Republican leader Mitch McConnell called it a “hare-brained scheme” and warned of revenue drying up during downturns. Some Republicans indicated such a tax plan could be challenged in court.

But key Democrats are also raising concerns, saying the idea of simply undoing the 2017 tax cuts by hiking top rates was more straightforward and transparent.

Our emerging political debate over taxing the rich seems to be getting bogged down in details — how high a tax rate, should we tax income or wealth, etc., etc.

Under the House’s bill from the Ways and Means Committee, the top individual income tax rate would rise from 37% to 39.6%, on those earning more than $400,000, or $450,000 for couples. The corporate rate would increase from 21% to 26.5%. The bill also proposed a 3% surtax on wealthier Americans with adjusted income beyond $5 million a year.

The panel’s chairman, Rep. Richard Neal (D-Mass.), said he told Wyden in a discussion Monday that the implementation of the senator’s proposed billionaires plan is “a bit more challenging.”

Neal suggested that the House’s proposal was off the table despite Sinema’s objections. In fact, he said, “our plan looks better every day.”

Once Democrats agree to the tax proposals, they can assess how much funding is available for Biden’s overall package to expand healthcare, child care and other climate change programs.

Democrats were hoping Biden could cite major accomplishments to world leaders later this week. They are also facing an Oct. 31 deadline to pass a related $1-trillion bipartisan infrastructure package for roads, broadband and other public works before routine federal transportation funds expire.

“We need to get this done,” Biden said in remarks at a New Jersey transit center.

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