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(43,091 posts) Mon Sep 13, 2021, 11:58 PM Sep 2021

House Democrats' Plan to Tax the Rich Leaves Vast Fortunes Unscathed

The House Ways and Means Committee’s proposal to pay for trillions in social spending leaves wealth gains and inheritances largely alone. It focuses instead on a more traditional target: income.

https://www.nytimes.com/2021/09/13/us/politics/tax-plan-democrats.html

WASHINGTON — House Democrats on Monday presented a plan to pay for their expansive social policy and climate change package by raising taxes by more than $2 trillion, largely on wealthy individuals and profitable corporations. But the proposal, while substantial in scope, stopped well short of changes needed to dent the vast fortunes of tycoons like Jeff Bezos and Elon Musk, or to thoroughly close the most egregious loopholes exploited by high-flying captains of finance. It aimed to go after the merely rich more than the fabulously rich. Facing the delicate politics of a narrowly divided Congress, senior House Democrats opted to be more mindful of moderate concerns in their party than of its progressive ambitions. They focused on traditional ways of raising revenue: by raising tax rates on income rather than targeting wealth itself. Representative Dan Kildee of Michigan, a Democrat on the Ways and Means Committee, which crafted the plan, called it “the boldest common denominator.” “Being for something doesn’t make it law; 218 votes in the House, 50 votes in the Senate and the president’s signature make it law,” he said, adding, “What I don’t want is another noble defeat.”

The proposal includes nearly $2.1 trillion in increased tax revenues, the nonpartisan Joint Committee on Taxation estimated on Monday. Democrats say those increases will go a long way to funding President Biden’s ambitions to expand the federal government’s role in education, health care, climate change, paid leave and more. But the bill dispenses with measures floated by the White House and Senate Democrats to tax wealth or to close off avenues that the superrich have exploited to pass on a lifetime of gains to their heirs tax-free. “It would be a monumental mistake for Congress to pass a bill that really exempts billionaires,” said Senator Ron Wyden of Oregon, the Democratic chairman of the Finance Committee. Key Democrats cautioned on Monday that the House proposal was likely to change — perhaps considerably — as Mr. Biden’s economic agenda wends its way through the House and Senate, where Democrats hold slim majorities and must hold nearly every member of their ideologically diverse caucus together. But White House officials welcomed the Ways and Means plan and said it took important steps toward the president’s vision of a tax code that rewards ordinary workers at the expense of the very rich.

The proposal includes substantial measures to raise taxes on the rich. Taxable income over $450,000 — or $400,000 for unmarried individuals — would be taxed at 39.6 percent, the top rate before President Donald J. Trump’s 2017 tax cut brought it to 37 percent. The top capital gains rate would rise to 25 percent from 20 percent, considerably less than a White House proposal that would have taxed investment gains as income for the richest, at 39.6 percent. Under the committee’s plan, a 3 percent surtax would be applied to incomes over $5 million. The value of estates shielded from estate taxation, which doubled to $24 million for married couples under the Republican tax cuts of 2017, would go back to $12 million at the end of this year, four years earlier than the scheduled expiration. The proposal would also raise taxes in a variety of ways on businesses called pass-through entities — like many law firms and financial companies — that distribute profits to their owners, who then pay individual income taxes on them. Those changes, including the extension of an existing 3.8 percent surtax to include pass-through income, would raise taxes primarily on high earners, generating several hundred billion dollars in revenues, by Democratic estimates. The joint committee estimated on Monday that the changes would raise about $1 trillion from high-income individuals.

Republicans balked at the proposal. Business lobbying groups rejected the package, with the U.S. Chamber of Commerce slamming it as “an existential threat to America’s fragile economic recovery and future prosperity.” “President Biden, Speaker Nancy Pelosi and House Democrats are ramming through trillions of wasteful spending and crippling tax hikes that will drive prices up even higher, kill millions of American jobs and drive them overseas, and usher in a new era of government dependency with the greatest expansion of the welfare state in our lifetimes,” Representative Kevin Brady of Texas, the committee’s ranking Republican, said of the plan. But what is not included is notable. The richest of the rich earn little from actual paychecks (Mr. Bezos’s salary as the founder of Amazon was $81,840 in 2020), so a surtax on income would have little impact. Their vast fortunes in stocks, bonds, real estate and other assets grow largely untaxed each year. “The proposal is extremely modest in the area of structural change,” said Eric Toder, a co-director of the nonpartisan Tax Policy Center in Washington. “Mostly, it is about raising rates on existing tax bases.” In the Senate, Democrats are taking aim directly at accumulated wealth. The Finance Committee has proposed a one-time surtax on billionaires’ fortunes, followed by annual levies on the gains in value of billionaires’ assets, similar to the way property taxes are adjusted each year to reflect gains in housing values.

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