Democrats need to tax the wealthy on infrastructure – will that go? – InsuranceNewsNet

BY JONATHAN W EISMAN New York Times news service

WASHINGTON – For most years, the notion that Congress could pass a $ 1.2 trillion plan to repair the country’s bridges, highways, tunnels, and railroad lines without tax increases would be a politician’s dream, a vision of endless ribbon cutting without angry cries of “tax and spend.”

But this pitch, by a group of senators negotiating a bipartisan infrastructure deal, is being hostile to many Democrats who are in favor of a five times the size package, some of which will be paid in at least $ 2.5 trillion in new taxes. They don’t just want a much bigger economic package; They also see a rare opportunity to capitalize on the political popularity of infrastructure spending to achieve their long-cherished political goal of raising taxes on the rich.

For Liberal Democrats in particular – including newcomers like Representative Alexandria Ocasio-Cortez of New York and senior members like Senator Ron Wyden of Oregon – the tax page of the ledger isn’t just an accounting chore to pay for expenses, but a critical policy-making tool in itself.

“What we’re doing is generating revenue, but we’re also making a large part of the American government fairer so people don’t feel like they are being played while the rich person gets away scot-free,” said Wyden, chairman of the finance committee for tax returns. Centrist senators, trying to find a bipartisan infrastructure compromise, stayed away from tax hikes after Republicans made it clear they were unwilling to touch the huge tax cut they pushed through in Congress in 2017. But leading Democrats – under President Joe Biden’s own budgetary rules – seem determined to move forward on a number of fronts to reshape taxation as part of larger infrastructure measures.

For weeks, Wyden’s committee has been drafting detailed tax policy changes that target three major areas: corporations, the energy industry and individual taxpayers.

On the corporate tax side, Democrats would raise the tax rate from the 21% set as part of former President Donald Trump’s 2017 tax cut, while reversing other guidelines in that bill that they say will create new incentives for U.S. Companies have created factories abroad to build. For example, one provision they would undo allows a company to protect annual foreign profits worth 10% of the cost of a factory built abroad from taxation – the larger the factory, the greater the tax protection.

The Democrats also want to severely curtail a 2017 measure that allowed many wealthy partnerships and limited liability companies to receive generous small business tax breaks. (In its current form, they say, 50% of the benefits go to millionaires.) They aim to gradually remove the deduction for taxpayers who earn more than $ 400,000 while eliminating a stipulation that many small business owners feel about prevented from taking advantage.

And they finally want to close the so-called carried interest loophole that allows private equity titans to tax the fees they charge their wealthy clients as capital gains, usually at 20% rather than income , which annually with. would be taxed 37%. On the energy side, Senate Democrats in the Finance Committee are removing 44 separate tax breaks that have been on the books for years – many of them for oil and gas drilling and production – and replacing them with tax breaks for clean electricity, clean transportation, and energy efficiency.

Policy changes related to individual taxpayers remain the underdeveloped part of the Democratic proposal. They had hoped to find a way to tax wealth by capturing some of the fantastic annual increases in the value of stocks and other assets of the super-rich – profits that are never taxed because they are never sold. Biden plans to raise the top income tax bracket from the 37% Trump secured to 39.6% and begin taxing capital gains from the sale of stocks by taxpayers who earn more than $ 1 million a year at income tax rates. For the richest taxpayers, this would almost double the capital gains ratio from the current 20%.

“Taxes must be collected on businesses and must be collected on the richest people who have made terrible, huge profits from the Trump tax game,” said Rep. Steve Cohen, D-Tenn.

A preliminary plan from Senator Bernie Sanders, I-Vt. and Chairman of the Senate Budgets Committee, plans to spend up to $ 6 trillion over 10 years on an economic package that will address what Democrats call “human infrastructure,” not just roads and bridges, about half of which will be paid. It would include investments in childcare, health care, climate change programs, universal pre-kindergarten, and access to community colleges. Wyden’s committee is expected to raise $ 2.5 trillion, a huge sum that could require a significant reorganization of the tax law.

“We recently learned that some of the richest billionaires in this country are not paying nickel in federal taxes in a given year,” Sanders said. “They have dozens of companies that are making billions in profits and not paying nickel in taxes.” He was referring to a ProPublica report released this month that used a ton of leaked IRS documents to show America’s richest men – including household names like Jeff Bezos, Elon Musk, Michael Bloomberg, and Warren Buffett – Pay almost no federal taxes in a few years, paid no taxes at all.

“It is obvious that if we are to meet the needs of working families in this country, we need income,” added Sanders, “and one way to get that income is by asking the richest people, who largest companies to pay their fair share. “

The nascent $ 1.2 trillion proposal – which still faces significant obstacles – eschews tax hikes and focuses entirely on physical infrastructure, omitting the social safety net expansions of those of Biden and the Democrats argue in Congress that they must be part of any infrastructure initiative.

While the White House has pushed hard for a bipartisan deal, officials have also made it clear that they support a reconciliation package to push through the rest of Biden’s economic agenda, including tax increases. This would allow them to dodge a Republican filibuster and move it forward by 50 votes, but they can only do so if their entire faction supports it.

Many liberals fear that if the bipartisan plan is successful, they will never be able to achieve this level of support. They are convinced that once they get their roads and bridges, conservative Democrats like Sens. Joe Manchin of West Virginia and Kyrsten Sinema of Arizona will not support a law of reconciliation. Nobody made a commitment to support such a package until they see the details.

Republicans are already preparing to hit Democrats hard on tax hikes. Kentucky Senator Mitch McConnell, the Republican leader in the Senate, said the 2017 Trump tax cut bill “was a major contributor to our having the best economy in 50 years before the pandemic.”

But the Democrats see a changed landscape. The ProPublica report added fodder. But even before the pandemic recession, corporate tax revenues had plummeted by 40% following Trump’s tax cuts. Although the 2017 tax bill allegedly cut the corporate tax rate from 35% to 21%, the effective corporate rate has dropped to 8%, said Texas Rep. Lloyd Doggett, a senior Democrat on the Ways and Means Committee.

“Voter attitudes towards taxes have changed a lot,” said Wyden. “For the past 10 years Republicans have always wanted to talk about taxes, pin those Democrats on taxes, ‘tax and spend’ and everything else. Now Americans understand our position that everyone should pay their price.” Share.”

Democrats are divided over how far to go.

Senator Elizabeth Warren, D-Mass., Urged Treasury Secretary Janet Yellen last week on Warren’s proposed property tax, which would add a 2% surcharge on the value of assets owned by individuals worth more than $ 50 million and at least $ 3 trillion US dollars.

“This is about decisions,” she said reluctantly to Yellen. “We can fund universal childcare or give Jeff Bezos enough tax savings to build a super yacht.”

Other Democrats, even Liberals, aren’t so sure.

“The whole life of a wealth tax scares a lot of people hoping to make some fortune,” Doggett said. “We don’t want to discourage economic success. We just want to create a level playing field.”

Sen. Mark Warner, D-Va., Is stuck in the middle. A business-friendly Democrat, he was tapped by Wyden to work with Ohio Senator Sherrod Brown, a worker-friendly Democrat, to work out a corporate tax package. But he is also a member of the group negotiating the bipartisan infrastructure agreement.

He said he was confident there would be unanimous support among Democrats to incorporate the international tax framework into a reconciliation bill that followed a tighter infrastructure compromise “because it’s just so damn complicated.”

But he also said he understands that the infrastructure deal may not even come to a vote unless his Democratic counterparts are sure they also have the votes to pass any tax measures and spending initiatives left out in the bipartisan deal would.

“Many of my colleagues have made it clear that they will not support the infrastructure package unless they have at least some understanding of what will happen with the reconciliation,” he said. “Well, that is a difficult challenge to find your way around.”