(Headline USA) The Democrats’ idea for a new unrealized capital gains tax to help pay for President Joe Biden’s leftist spending bonanza has quickly run into criticism as too cumbersome.
While many continue to demand that the so-called budget bill—which, in fact, seeks to impose a radical social agenda—come down in cost, even some lawmakers who support the bill have said they prefer the original plan of simply raising the top tax rates on higher-income earners. That would likely lead to a trickle-down tax increase for all consumers as those affected would further raise their rates to offset the losses.
Nonetheless, leave it to the Biden administration to devise a plan even more outlandish to make their economically devastating plan suddenly appear to be a reasonable compromise.
MCCONNELL: Democrats have become so tax-hike-happy, they’re throwing spaghetti at the wall to see what sticks. In parallel with taxing people on hypothetical gains they haven’t realized, they also want to hand out tax breaks for hypothetical losses that people haven’t realized.
— Senate Republican Communications Center (@SRCC) October 26, 2021
Senate Minority Leader Mitch McConnell, R-Ky., 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.
With the revenue side of the package deeply in flux, Democrats are at a standstill trying to wrap up negotiations on Biden’s overall package. But party leaders insisted Tuesday a broad deal remains within reach as they rush to show progress before the president departs later this week to global overseas summits.
House Speaker Nancy Pelosi, D-Calif., told lawmakers during a caucus meeting they were on the verge of “something major, transformative, historic and bigger than anything else” ever attempted in Congress, according to a person who requested anonymity to share the private remarks.
Senate Majority Leader Chuck Schumer opened the Senate with a simple message: “We’re working to get it done.”
However, vast differences among Democrats remain over the basic contours of the sweeping proposal and how to pay for it. It’s now estimated to total at least $1.75 trillion over 10 years, and could still be more.
From the White House, Press Secretary Jen Psaki said Biden’s preference was still to have a deal in hand before departing, but she acknowledged that might not happen, forcing him to keep working on the package from afar.
“There are phones on Air Force One and also in Europe,” Psaki told reporters.
In the meantime, she said more lawmakers were heading to the White House for negotiations and insisted talks were progressing: “We are almost there.”
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 onto the debt.
Biden claims any new taxes would hit only the wealthy, those earning more than $400,000 a year, or $450,000 for couples. He also has insisted the package would wind up costing zero dollars, contrary to evidence.
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 if 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 the wealthy to 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 so-called billionaires’ tax is being modeled on a 2019 bill from Wyden to treat assets as income. Another idea, up to a 3% ultra-rich surtax, 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 three-years consecutive income of $100 million, to pay taxes on the gains of stocks and other tradeable assets, rather than waiting until holdings are sold.
A similar billionaire’s 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.
Overall, the billionaires’ tax rate has not been set, but it is expected to be at least the 20% capital gains rate. Democrats have said it could raise $200 billion in revenue that could help fund Biden’s package over 10 years.
But key fellow Democrats are also raising concerns, saying the idea of simply undoing the 2017 tax cuts by hiking top rates was more straightforward and transparent.
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 Monday evening that he told Wyden that the implementation of the senator’s proposed billionaire’s plan is “a bit more challenging.”
Neal suggested that the House’s proposal was not 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 is funding available for Biden’s overall package to expand health care, 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 of roads, broadband and other public works before routine federal transportation funds expire.
After months of start-and-stop negotiations, disputes remain.
Among the unresolved provisions: plans to expand Medicare coverage with dental, vision and hearing aid benefits for seniors; child care assistance; free pre-kindergarten; a new program of four-weeks paid family leave; and a more limited plan than envisioned to lower prescription drug costs.
The climate change provisions may be resolving now that White House floated a new strategy. It involves beefing up clean energy incentives after Manchin rejected a more punitive approach.
Pelosi said she expected an agreement by week’s end, paving the way for a House vote on the $1 trillion bipartisan infrastructure bill that stalled during deliberations on the broader Biden bill.
But Rep. Pramila Jayapal, D-Wash., the chair of the Congressional Progressive Caucus whose support will be crucial for both bills, said lawmakers want more than just a framework for Biden’s plan before they give their votes for the smaller infrastructure package.
“We want to vote on both bills at the same time,” Jayapal told The Associated Press.
Adapted from reporting by the Associated Press
