Democrats pushing slew of tax hikes to fund massive spending plan: A roundup of proposals

Tax hikes could happen this year: Former CBO director

Former Congressional Budget Office director Doug Holtz-Eakin on Democrats’ push Wednesday for the infrastructure spending bill.

Wealthy Americans are bracing for steeper taxes as soon as this year as Democrats push forward with a massive, multitrillion-dollar spending bill.

House committees are currently crafting a $3.5 trillion budget plan that will serve as the blueprint for President Biden's economic agenda that seeks to dramatically boost federal investment in education, child care and paid family leave. 

Formal legislation could be released as soon as this week for the tax and spending plan, which has been billed by the White House as a "once-in-a-generation investment" in the nation's future. Democrats plan to pass the measure using the procedural tool known as reconciliation, which allows them to bypass a Senate filibuster by GOP lawmakers. 

However, given their extremely slim margins in both the House and Senate, Democrats will need to ensure virtually every caucus member votes in lockstep to ensure the bill's passage.

Here's a closer look at some of the specific plans for individual and corporate tax changes:

Raise the top individual income tax rate to 39.6%

A key part of Democrats' tax and spending plan involves raising levies on the top sliver of U.S. households, including restoring the top individual income rate to 39.6%.

BIDEN TAX PLAN CALCULATOR: HOW MUCH WOULD YOU PAY UNDER THE NEW PROPOSALS?

That new top rate – which reverses part of the Trump-era Tax Cuts and Jobs Act – would apply to single individuals with taxable income of more than $452,700 and married couples with joint taxable income of $509,300, according to the president's $6 trillion budget proposal released earlier this year.

Heads of households earning more than $481,000 and married individuals filing separate tax returns with income over $254,650 would also pay the higher rate.

The current top marginal rate of 37% is currently paid by singles earning $523,601 or more and couples making $628,301 or more. 

Assuming the proposal becomes law – which hinges on a deeply divided Congress – the new tax rate would start to apply during the 2022 tax year. 

Raise taxes on capital gains and dividends for higher earners 

Under Biden's American Families Plan – which would serve as the basis for Democrats' $3.5 trillion reconciliation bill – the top capital gains tax would climb to 39.6% from 20% for Americans earning more than $1 million, or roughly 500,000 households. 

The president plans to keep an existing Medicare surcharge in place, bringing federal tax rates as high as 43.4% for some Americans.

SOME RETIREES COULD SEE 5% SOCIAL SECURITY RAISE WITH BIDEN AS PRESIDENT

Taxes on long-term capital gains – generally classified as an asset that's held for more than one year – currently range from 0% to 20%, depending on a person's income. 

Wealthier investors are also subject to an additional 3.8% tax on long- and short-term capital gains that's used to fund ObamaCare. Short-term capital gains on assets sold within a year are typically taxed as ordinary income.

Increase levies on inherited assets 

The president also wants to eliminate the so-called stepped-up basis. 

Under current law, when heirs inherit an asset that has appreciated in value, they get a "step-up" in basis, meaning they receive the holding at its current market value. Beneficiaries can sell those assets and pay capital gains based only on the time they receive the asset and the time they sold it, allowing them to minimize the tax bite.  

The first $1 million of gains would be exempt from the end of the stepped-up basis, and there would be no tax if the gains are used for charitable donations.

Congress estimates that stepping up the basis of inherited assets costs the government about $43 billion a year. Eliminating the practice – coupled with raising the top statutory rate on capital gains from 20% to 39.6% – would generate an estimated $113 billion in new revenue over the next decade, according to recent findings from the Penn Wharton Budget Model, a nonpartisan group at the University of Pennsylvania's Wharton School. 

GET FOX BUSINESS ON THE GO BY CLICKING HERE

End the private-equity tax break

Democratic Sens. Ron Wyden and Sheldon Whitehouse went a step further than Biden, introducing legislation in August to repeal the break for carried interest, which allows private equity fund managers to pay lower taxes on their earnings than they would for regular income.

Under the proposal, they would also be prohibited from deferring tax payments on those earnings.

Requiring fund managers to pay taxes on their profits would raise an estimated $63 billion over the next decade, according to the Joint Committee on Taxation.

Hike taxes on corporations  

Biden has also called for higher taxes on businesses, including hiking the corporate tax rate to 28% from 21%, rolling back a key part of Republicans' 2017 tax law. 

The president has also pushed for a higher global minimum on companies' foreign earnings.

Source: Read Full Article