Democrats unveil billionaires' tax as Biden plan takes shape

By LISA MASCARO, AAMER MADHANI and ALAN FRAM

Associated Press

Oct. 27, 2021 Updated 2:04 PM PT

WASHINGTON —

House Speaker Nancy Pelosi (D-San Francisco) told colleagues Wednesday that Democrats are in “pretty good shape” on President Biden’s sweeping domestic plan, but fresh problems emerged as a pivotal Democrat panned a new billionaires’ tax to help pay for the $1.75-trillion package.

Biden and Democrats are racing to wrap up talks before the president departs this week for overseas summits, in part to show foreign leaders the U.S. is getting things done under his still-new administration.

The president could visit Capitol Hill late in the day and the administration is assessing the situation “hour by hour,” White House Press Secretary Jen Psaki said.

“We are on track now to move forward once we get an agreement,” Psaki said at the White House.

The upbeat comments from the Democratic leaders on Biden’s big proposal of social services and climate change programs provided fresh hopes for a deal to be announced Wednesday. But negotiations churned with new setbacks — a just-proposed tax on billionaires could be scrapped after Democratic Sen. Joe Manchin III of West Virginia objected, according to a senior party aide, who requested anonymity to discuss the private talks. Manchin panned it as unfairly targeting the wealthy.

“People in the stratosphere, rather than trying to penalize, we ought to be pleased that this country is able to produce the wealth,” Manchin told reporters.

Manchin said he prefers a minimum 15% flat “patriotic tax” to ensure the wealthiest Americans don’t skip out on paying any taxes. “There’s a patriotic duty that you should be paying something to this great country,” he said.

Nevertheless, he said: “We need to move forward — the president has made that very clear — he wants to move forward and we owe it to the president to move forward.”

White House officials met at the Capitol with Manchin and another key holdout, Democratic Sen. Kyrsten Sinema of Arizona.

“Making progress,” Sinema said as she dashed into an elevator.

The quickening pace of negotiations came as Biden pressed to have a deal in hand ahead of the summits. There’s also a Sunday deadline to approve a smaller, bipartisan roads-and-bridges infrastructure bill or risk allowing funds for routine transportation programs to expire. But that $1-trillion bill has been held up by progressive lawmakers who are refusing to give their support without the bigger Biden deal.

Pelosi in a letter to colleagues called for a Thursday committee hearing to consider the packages, a typical step necessary before a vote by the full House. Her earlier remarks were conveyed during a private meeting of House Democrats.

Democrats had hoped the unveiling of the billionaires’ tax could help resolve the revenue side of the equation after Sinema rejected the party’s earlier idea of reversing Trump-era tax breaks on corporations and the wealthy.

The new billionaires’ proposal would tax the gains of those with more than $1 billion in assets or incomes of more than $100 million over three consecutive years.

It would hit the wealthiest of Americans, fewer than 800 people, starting in the 2022 tax year, requiring them pay taxes on the gains of stocks and other tradeable assets, rather than waiting until holdings are sold.

A similar billionaires’ tax would be applied to non-tradeable assets, including real estate, but it would be deferred with the tax not assessed until the asset was sold, though interest would have to be paid.

Overall, the billionaires’ tax rate would align with the capital gains rate, now 23.8%. Democrats have said it could raise $200 billion in revenue that could help fund Biden’s package over 10 years.

“No senator wants to stand up and say, ‘Gee, I think it’s just fine for billionaires to pay little or no taxes for years on end,’” said Democratic Sen. Ron Wyden of Oregon, chairman of the Senate Finance Committee, helming the new effort.

The new billionaires’ proposal, coupled with a new 15% corporate minimum tax, is designed to fulfill Biden’s desire for the wealthy and big business to pay their “fair share.” They also fits his promise that no new taxes hit those earning less than $400,000 a year, or $450,000 for couples. Biden wants his package fully paid for without piling on debt.

“I’ve been talking about this for years,” said Sen. Elizabeth Warren (D-Mass.), who campaigned for the presidency on a wealth tax, and backs Wyden’s approach. “I’ve even made billionaires cry over this.”

While the new tax proposals had appeared agreeable to Manchin and could win over Sinema, whose support is needed in the 50-50 split Senate where Biden has no votes to spare, Republicans have derided the billionaires’ tax as “harebrained,” and some have suggested it would face a legal challenge.

The idea of the billionaires’ tax has also run into criticism from other Democrats as cumbersome or worse.

Democratic Rep. Richard Neal of Massachusetts, the chairman of the Ways and Means Committee, said he told Wyden the billionaires’ tax may be more difficult to implement than the route his panel took in simply raising rates on corporations and the wealthy, undoing the 2017 tax cuts.

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

Together, Manchin’s and Sinema’s objections have packed a one-two punch, throwing Biden’s overall plan into flux and halving what had been a $3.5-trillion package.

That was also forcing difficult reductions, if not the outright elimination, of policy priorities — including paid family leave, child care, and dental, vision and hearing aid benefits for seniors.

The once-hefty climate change strategies are losing some punch too, focusing away from punitive measures on polluters that raised objections from coal-state Manchin, in a shift toward rewarding clean energy incentives.