Taxes and more taxes
Democrats want the wealthy to fund historic spending levels
At Monday night’s Met Gala, one of Manhattan’s swankiest red carpet events, U.S. Rep. Alexandria Ocasio-Cortez, D-N.Y., smiled for the cameras in a white gown with “Tax the Rich” written in slashing red letters down her back. This week, congressional Democrats released the details of tax changes they hope will do just that.
The changes would bankroll $3.5 trillion in government spending President Joe Biden has requested over the next 10 years. Democrats hope to approve the plan using the reconciliation process in Congress, which allows funding measures to avoid Senate filibusters and pass with a simple majority. The reconciliation package ground through committee markups this week amid debate over its policies on climate change, healthcare, and education measures.
The income tax rate for individuals making more than $400,000 a year would increase from 37 percent to 39.6 percent, and capital gains taxes would go up from 20 percent to 25 percent. Those making more than $5 million annually would pay an additional 3 percent income tax. The proposal also hikes real estate taxes, switches corporate tax rates from a flat 21 percent to a graduated rate that peaks at 26.5 percent, and calls for extra funding to help the Internal Revenue Service beef up tax enforcement on wealthy Americans. The changes still primarily target income, not stored wealth from owning valuable companies, a more controversial approach advocated by Democrats such as Sen. Elizabeth Warren of Massachusetts.
All told, Democrats hope the changes will raise federal revenue by $2.9 trillion over the next 10 years. They predict another $600 billion from economic growth, adding up to the desired $3.5 trillion. But one memo noted in all-caps, underlined, and bolded type, “This number remains very preliminary.”
Progressives such as Sen. Bernie Sanders, I-Vt., consider $3.5 trillion the spending floor, but moderate Sen. Joe Manchin, D-W.Va., insists the reconciliation package should only cost between $1 trillion and $1.5 trillion. He’s also hesitant about subsidies for clean energy and a permanent expansion of the child tax credit, which would include payments for families with no income. With the Senate split 50-50 between parties, Democrats need 100 percent support from their members plus Vice President Kamala Harris’ tie-breaking vote to pass the reconciliation package. That gives Manchin and fellow moderate Democrat Sen. Kyrsten Sinema of Arizona power to negotiate changes.
Policies in the package remained in flux this week as Democrats clashed over healthcare, including government negotiations of prescription drug prices and expansion of Medicare to include vision, hearing, and dental benefits. The package will likely keep changing as it goes through the House Budget Committee and rule writing. House Speaker Nancy Pelosi, D-Calif., wants that process finished and a House vote by the end of September, a tall order with infrastructure, the debt ceiling, and government funding deadlines all arriving this month or next. Lawmakers headed home Wednesday for the two-day Yom Kippur break with a daunting to-do list unfinished in Washington.
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