U.S. House Democrats seek to roll back Trump tax cuts
for wealthy, corporations
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[September 14, 2021] By
David Lawder and Richard Cowan
WASHINGTON (Reuters) -Leading Democrats in
the U.S. House of Representatives on Monday proposed a substantial
roll-back of former President Donald Trump's tax cuts, including raising
the top tax rate on corporations to 26.5% from the current 21%.
Democrats on the powerful House Ways and Means Committee said they will
debate legislation this week that would achieve the changes as part of
their broader, $3.5 trillion domestic investment plan.
In an attempt to finance the new spending, the Democratic-led committee
will debate a proposal to raise $2.9 trillion in revenue over 10 years,
according to a document circulated among members of the panel.
Besides increasing corporate taxes, wealthy individuals would see a jump
in their income taxes as well as higher capital gains and estate taxes.
Even if the legislation as proposed passes Congress and is signed by
Democratic President Joe Biden, corporate taxes would still be lower
than they were before the enactment of the tax cuts pushed through by
Republicans in 2017. But the top individual income tax rate would revert
to its pre-2017 level.
The tax-writing Ways and Means Committee has scheduled work sessions for
Tuesday and Wednesday to debate tax policy and other matters under its
jurisdiction to be included in the $3.5 trillion "reconciliation" bill,
which would require a simple majority to be passed in the Senate.
House Ways and Means Chairman Richard Neal will attempt to win the
committee's approval of the tax changes that are aimed at helping pay
for expanded social services for the elderly and children and tackling
climate change.
Neal, a Massachusetts representative, wants to set a graduated corporate
tax rate of 18% on annual income below $400,000, 21% on income up to $5
million and 26.5% on income above $5 million.
The benefit of the graduated corporate rate would phase out for firms
making more than $10 million.
Currently, the federal tax rate on corporations is 21%, down from the
35% rate that was in effect prior to the 2017 Republican tax
restructuring. Biden had proposed raising the current corporate rate to
28%.
Neal's plan would raise the top individual tax rate to 39.6% from 37% on
taxable income above $400,000 for individuals and $450,000 for married
couples. Those thresholds are below Biden's proposed thresholds of
$452,700 for individuals and $509,300 for married couples.
Republicans have been particularly critical of moves to increase estate
taxes. The House Democrats' plan would accelerate the expiration of
Republicans' temporary doubling of an exemption from those taxes to $24
million.
The exemption, which was passed in 2017, would expire at the end of 2021
instead of the end of 2025 under current law.
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The U.S. Capitol Building is pictured in Washington, U.S., August
20, 2021. REUTERS/Elizabeth Frantz
Neal's proposal also would increase the capital gains tax rate for those with
incomes above $400,000 to 25% from the current 20% and include an additional 3%
surcharge on taxable income in excess of $5 million.
Biden has proposed a capital gains rate of 39.6% for those with incomes above $1
million, spurring concern from Republicans and some Democrats. The lower, 25%
rate increase now being proposed would capture far more taxpayers and be
supplemented by the 3% surcharge on income above $5 million.
In addition to raising taxes, Democrats also proposed using the tax code to
encourage the construction of more low-income housing, including in rural areas,
which could help win the support from some wavering moderate Democrats,
including Senator Joe Manchin from West Virginia.
And in an attempt to reduce carbon emissions, Democrats are seeking sizeable tax
credits for the purchase of electric vehicles.
REPUBLICANS OPPOSED
So far, the Democrats' wide-ranging legislation has not attracted the support of
any Republicans, who have been adamant in defending their 2017 tax cuts and
argue that the tax hikes would hurt businesses and kill jobs. Democrats argue
the Trump tax restructuring favored the wealthy while Republicans credit it for
helping spur economic growth.
House Speaker Nancy Pelosi is aiming to have a vote in the Democratic-controlled
House on the $3.5 trillion bill - or a somewhat downsized measure - as soon as
the end of this month.
The final House version of the bill would be tailored to win the support of
moderate Democrats in the Senate, where Democrats have 50 of the 100 seats.
Democratic Vice President Kamala Harris casts the tie-breaking vote when needed.
The legislation would proceed in the Senate under special rules circumventing
the need for at least 60 votes to advance most other bills.
The House Democrats' proposal did not include language for a controversial
carbon border tax that some Democrats support. It aimed to level the playing
field between U.S. companies that face tougher regulations than foreign
competitors on products such as cement, steel and aluminum. The White House has
withheld support for the tax.
In a statement, committee Democrats said that in addition to raising corporate
taxes, there would be a provision in the bill to "level the playing field by
cutting taxes for our nation's smallest businesses."
(Reporting by Richard Cowan and David Lawder; Editing by Chizu Nomiyama and Paul
Simao)
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