Democrats’ Tax Plan Focuses on Corporations and the Wealthy

Democrats’ Tax Plan Focuses on Corporations and the Wealthy

The framework released Thursday for President Joe Biden’s Build Back Better plan contains nearly $2 trillion in tax increases, most of them targeting businesses and high-income households. Alan Rappeport of The New York Times has a rundown on some of the central provisions:

Taxing the rich: Democrats have proposed a new surtax on high-income households. Those with annual incomes over $10 million would pay an additional 5% tax, and those over $25 million would another 3%.  The plan would “effectively raise the top tax rate on ordinary income to 45 percent for the highest earners,” Rappeport says. The Biden administration estimates that the taxes would bring in $230 billion over 10 years.

Democrats also want to close loopholes some high-income households use to avoid paying a 3.8% Medicare surtax. The proposed rule change is projected to bring in $250 billion over a decade.

Taxing corporations: The White House proposes to create a 15% minimum tax for large businesses, so no company can avoid paying taxes altogether. Administration officials estimate that the tax, which would affect about 200 companies, would bring in $325 billion over 10 years.

A separate proposal would apply a 1% surcharge to stock buybacks, a move that would produce an estimated $125 billion over a decade.

And Democrats want corporations to pay more on their international earnings, which sometimes disappear into tax shelters overseas. A minimum tax rate of 15% on foreign earnings is projected to produce $350 billion over the next 10 years.

Reducing the tax gap: With the goal of bringing in billions of dollars in taxes that are owed but go uncollected, the Democratic plan calls for increasing IRS funding by $80 billion over 10 years. That investment is projected to produce $400 billion in additional revenue.

Reducing the deficit: With nearly $2 trillion in revenues and $1.85 trillion in spending, the Democratic proposal would shrink the federal budget deficit. The overall proposal is still a work in progress, though, and one provision that could end up in the final bill – a temporary repeal of the limit on state and local tax deductions – could push the plan into the red. And even without any additional spending, it’s not clear that the Congressional Budget Office will agree with the administration’s revenue projections, raising the distinct possibility that the official score for the bill will fail to show deficit reduction.