The tax hikes House Democrats plan to offset the costs of President Joe Biden's massive infrastructure and social welfare legislation would net more than $2 trillion in revenue over the next decade, according to an estimate released Monday.
The combination of tax code shake-ups by the House Ways and Means Committee, which includes increases to the capital gains rate, top marginal income tax rate, and corporate tax rate, among others, will raise nearly $2.1 trillion, the nonpartisan Joint Committee on Taxation concluded.
When tax breaks for housing, green energy, and other Democratic priorities are factored in, the Monday plan would generate $871 billion in net revenue.
The plan is still being debated, and the initial proposal is likely to disappoint some centrist Democrats as well as some of those further to the left of the party.
The proposal increases the capital gains rate for high earners from 20% to 25%, a number that falls flat of President Joe Biden’s controversial pitch to raise the capital gains rate by nearly double to 39.6%.
Additionally, Democrats want to raise the corporate tax rate to 26.5% from 21%, which is less than the White House’s original proposal to raise the rate up to 28% but higher than Democratic Sen. Joe Manchin’s hope of a 25% rate.
Manchin is a must-have vote given the wire-thin majority that Democrats hold in the Senate, and the give and take is likely a nod to Democrats’ need to maintain centrist support.
House Democrats also plan to raise the top marginal income tax rate from 37% to 39.6% as part of the wide array of tax proposals. The increase would restore the top marginal rate to the same level as it was before Republicans’ 2017 tax cuts.
Other proposals include higher taxes on tobacco and nicotine, a new 3% surtax on people making more than $5 million, and increased restrictions on carried interest, a type of income earned by private equity firms, among several other proposals.
Democrats had previously predicted that $2.9 trillion in spending will be paid for through the proposals themselves, while the remaining $600 billion would be recouped through increased economic growth associated with the spending portion of the plan.
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