Senate Democrats reach an agreement to raise taxes on some high earners

[kpete]

Source: NBC

The money will be used to pay for Medicare in an effort to keep the federal health care program from going bankrupt, said one source familiar with the proposal.

WASHINGTON — Senate Democrats have reached an agreement to raise taxes on some high earners whom they say are abusing a loophole to slash their tax bills, two sources familiar with the discussions told NBC News.

The lawmakers, the sources said, plan to close the tax break for those earning more than $400,000 a year, requiring them to pay 3.8 percent in taxes on certain income from pass-through businesses, in what is effectively a slimmed-down package after the Build Back Better Act stalled last year.

They expect that closing the tax loophole will raise about $200 billion over a decade, one source said, and the money will be used to pay for Medicare through 2031, in an effort to keep the federal health care program from going bankrupt.

Read more: https://www.nbcnews.com/politics/congress/senate-democrats-reach-agreement-raise-taxes-high-earners-rcna37123

[mvd]

1. Great news!

K&R. Thank you Democrats

[LetMyPeopleVote]

2. This made me smile

[pandr32]

3. Yes--close the loopholes!

That isn't the same as raising taxes on high earners, though, which I hope we'll eventually do.

[KPN]

12. Yup.

[moose65]

4. It's a start

Another way to "save Medicare" would be to get rid of the ridiculously expensive Medicare Advantage - which is just a backdoor attempt to privatize Medicare.

[GoneOffShore]

27. It'll not happen. The insurance industry is making too much money.

Of course, if we nationalized the insurance industry.......

[pamdb]

5. Jeez

Even Sinema and Manchin?

[kacekwl]

8. Sure they are onboard. Like the "gun legislation Bill" gives

them a chance to say they did something when they know 3.8% is a pittance to what it should be. Hurray

[GB_RN]

9. Beat Me To It...

I know Manchin has stated that he's not opposed to raising taxes, but Sinema stated her opposition to any tax increase on wealthy people several times since the Democrats took control. If she's changed her mind, it's been very recently.

[TygrBright]

6. How about a tax on UNEARNED income, hmmmm?

Like all those massive stock dividend payouts, bond coupons, rents, etc.?

For most oligarchs that amounts to massively more income than anything they "earn".

wistfully,
Bright

[KPN]

14. Dividends are taxable unless they are reinvested within a very short timeframe.

[progree]

17. Haven't heard of the very short timeframe thing. ALL my dividends, even automatically reinvested

Last edited Thu Jul 7, 2022, 06:46 PM - Edit history (1)

ones (and that's as quick as one can get) are taxed. I see that on my 1099-DIV's every year. BUT:

so-called QUALIFIED dividends are taxed at the much lower long-term capital gains rate which maxes out at 20%.

Edited to add -- if one's taxable income is low enough (less than $41,675 for singles and less than $83,350 for married filing jointly in 2022), a 0% tax rate on QUALIFIED dividends applies.

[KPN]

25. You're right. Obviously not a finance or accounting

expert here. I guess I was thinking about dividends earned in an IRA account — but dividends aren’t gains, so I’ guessing they’d be taxable there as well. …. Thanks for the correction.

[progree]

26. You're welcome 😊. As for IRA's --

In a traditional IRA, nothing is taxed until one makes a withdrawal. So all income and all gains can and usually do just accumulate untaxed for years.

But any withdrawal from the IRA is taxed at one's ordinary tax rate just like if it were wage income. So it does get taxed in the end.

(If someone inherits that IRA, generally they have to withdrawal the entire account balance within 10 years, and pay the taxes on those withdrawals).

The only timeframe thing that comes to mind is the 60 day rollover -- if you withdrawal from a traditional IRA, you can put it into a new or another traditional IRA within 60 days. That withdrawal won't be taxed, as long as you get it into a traditional IRA account in 60 days. Otherwise it will be taxed.

(A direct custodian to custodian transfer from one traditional IRA to another is better)

[Calista241]

31. IRA's should not be taxed beyond the taxes that were agreed to when the money was initially invested

Middle class families have built their retirement around IRA's (and Roth IRA's and 401k's). The amount of money you can invest in these investment vehicles every year is limited because of the tax implications. Absolutely nobody is a billionaire because of their personal investments in IRA's.

If we start taxing this money, we're going to have to have programs to financially help middle class investors that we've just impoverished. Especially in this era of inflation, where money is worth less than it was when initially invested.

[oldsoftie]

22. You don't think rental income is earned?

Upkeep, taxes, insurance, non-payers, etc. All ways its "earned"

[Withywindle]

28. People who pay rent are paying landlords' salaries (and mortgage probably)

They're the customers of the landlord's business.

[oldsoftie]

29. So store owners don't earn their income either?

Because customers pay THIER bills by buying their goods. Everyone pays someone else's bills by paying for the goods or services provided. If I rent my house all the responsibility is on ME to keep the house available & ready to be lived in.

[pfitz59]

7. Outlaw billionaires!

Tax them ALL back to millionaire status. Too much wealth in too few hands is totally un-Democratic

[oldsoftie]

21. Outlawing a class of citizens is also un-Democratic.

There's less than 1000 of them in the US anyway. Make sure they pay taxes, yes.

[OldBaldy1701E]

23. And, those 'less than 1000' are running the country if not the planet. (n/t)

[DBoon]

34. a whole class called "slaveholders" were once outlawed

aristocracies and monarchies have been outlawed in many countries.

When a social class works against the common good instead of enhancing the common good, that social clans should no longer exist.

[oldsoftie]

36. Equating owning people and being a successful business person is ridiculous.

what a stretch.
And that attitude will beat a Democrat running for office almost every time

[DBoon]

39. Being a successful slaveowner was once considered more highly than being a business person

Many people thought slavery was completely justified and part of the natural order like many people today think that allowing a very small group to have enough money to subvert democracy and own governments is part of the natural order.

These "successful businessmen" are amoral sociopaths who have been allowed to accumulate wealth and power to the point they have destroyed democracy and basic civil liberties.

[oldsoftie]

42. You're simply being ridiculous. Good lord people actually THINK like this?

most of these super rich are rich by company values not other assets.

[HariSeldon]

10. THIS is how to fight inflation

Inflation = too many dollars in circulation

Solution: reduce the number of dollars circulating
Mechanism: A) raise taxes without increased government spending, or B) transfer money from idle (wealthy) economic actors to active (poor) economic actors.

[Calista241]

32. We also have a supply issue.

Giving people more money to buy stuff is going to exacerbate that supply problem.

It's going to take a few years to iron out the issue, and government and companies need to come up with a plan to not import everything. Some stuff needs to be made in America, whether by workers or by robots. Global supply chains are vulnerable to disruption, whether from a pandemic or from geopolitical power aggression.

[oldsoftie]

37. We didnt need that last "stimulus". Probably didnt need trumps last one either.

throwing More cash in the system was asking for trouble. Some here did warn about it.

But we CERTAINLY need to bring critical manufacturing back here or at least to nearby friendly countries. WHY do we get 90+% of our antibiotics from CHINA? Along with many other critical items like semiconductors & materials for batteries. CHINA is locking down sources of solar & battery materials all over the world. And using OUR money (and the EU to a lesser extent) to do it.

[Bayard]

11. I don't know....

Its good news, but, $200 billion over 10 years doesn't sound like that much to me. Relatively speaking, if its supposed to, "save," Medicare.

[progree]

15. You're right -- this only affects Medicare Part A, the Hospital Insurance program

According to the Social Security and Medicare Trustees (made up of four high-level Biden administration officials including Treasury Secretary Janet Yellen), that came out early in June --

https://www.ssa.gov/oact/trsum/

The Hospital Insurance (HI) Trust Fund, or Medicare Part A, which helps pay for services such as inpatient hospital care, will be able to pay scheduled benefits until 2028, two years later than reported last year. At that time, the fund's reserves will become depleted and continuing total program income will be sufficient to pay 90 percent of total scheduled benefits.

So what the $200 billion will do is make up the 10% shortfall in this program for whatever period of time.

Parts B and D are paid for from premiums (25%) and from the general fund, i.e. general tax revenue, mostly income taxes (73%). It's a popular myth that these are funded by our payroll (FICA) taxes. They are not. The above link discusses their financing as well (search the page for "Part B" ). Just to quote a small piece of it:

The Supplementary Medical Insurance (SMI) Trust Fund held $183 billion in assets at the end of 2021. The Trustees expect Parts B and D to be adequately financed over the next 10 years and beyond because income from premiums and general revenue are reset each year to cover expected costs and, for Part B, to ensure an adequate contingency reserve.

As an aside, I discuss and deal with the many myths about the Social Security part in these threads:

    https://www.democraticunderground.com/10142925306
    https://www.democraticunderground.com/10142927989

[LonePirate]

13. Are Manchin and Sinema both on board with this?

I would assume Manchin is but Sinema has been the stickler on taxes in the past. Perhaps she is only concerned with corporate tax rates?

[yaesu]

16. how about reversing the "YUGE" rich tax break that repukes forced on us. nt

[RestoreAmerica2020]

18. Great news! Pero, quien sabes con los dos Dems--Manchin y Senema

..bc when it comes to the actual vote ... 🤔


Paz

[PSPS]

19. And president manchin will change his mind when it's up for a vote.

[oldsoftie]

20. How about getting rid of the SS cap? Bet that would have a huge impact.

[betsuni]

24. K&R

[dlk]

30. Is a tax increase just prior to the midterms a good idea?

I’m all for raising taxes on the wealthy. They need to pay their fair share of taxes. I’m concerned about the timing, though.

[TeamProg]

33. Taxes on the wealthiest are historically, insanely LOW: Historical U.S. Federal Indiv. Income Tax

Check out the 1960's and 70's.

1963 = 91% !!

Save the link for your future arguments vs. Wingnuts.


https://taxfoundation.org/historical-income-tax-rates-brackets/

[oldsoftie]

38. Once again NOBODY ever paid those rates. Anywhere near it. Its a myth.

The actual effective rate of the average millionaire in 1960, for example, was about 46%.
There are deductions galore back then

[TeamProg]

40. Right, but don't we know tax deductions work? The Marginal Rates listed in 2021 are

accurate, yes? And there are STILL "deductions galore" these days.

And the 1960's rates on the chart are also accurate ON WHAT YOU EARNED.

IF YOU GENERATED 400k IN INCOME BUT INVESTED 300K OF IT IN A HOUSING PROJECT OR OTHER BUSINESS YOUR TAX RATE WOULD BE BASED ON 100K, YES? SO THEN USE THE TAX RATE FOR 100K.

THAT IS THE IDEA BEHIND HIGHER TAXES! FORCE EARNERS TO RE-INVEST IN THE ECONOMY AS A WRITE-OFF / EXPENSE, BUT ALSO TO CREATE FUTURE INCOME THAT WOULD BE TAXED.

TOO MANY HIGH EARNERS ARE JUST SITTING ON CASH, NOT RE-INVESTING SINCE THE TAX RATE THREAT BARELY EXISTS TODAY.

[oldsoftie]

41. We don't have NEAR the number of deductions today as back then.

And no, if you invest in a housing project with earnings those earnings are still taxable. You may be thinking about a 1031 exchange. Which involves money you never actually get.
And trust me, no one is sitting on a ton of money in cash these days. As in millions.
The 60s rates are accurate but not on what you earned. It was AFTER deductions. Thats where the 46% comes in. No point in raising rates if nobody pays them. Drop deductions. Same with businesses.

[TeamProg]

44. That is what I was saying:

"""
The 60s rates are accurate but not on what you earned. It was AFTER deductions."" CORRECT, AS WE ALL KNOW HOW THE TAX RATES ARE ARRIVED AT = AFTER DEDUCTIONS.


"""No point in raising rates if nobody pays them. Drop deductions. Same with businesses. """" NO.

Raise the rates. Create more economic stimulating deductions for businesses and private persons, like investments in solar and new tech. AND OF COURSE, any ""earnings those earnings are still taxable"". Forcing high earners to re-invest their gains again.


"""And trust me, no one is sitting on a ton of money in cash these days. As in millions. """

Wealthy Americans have BILLIONS in domestic and off-shored Banks rather than re-investing in our economy. Technically that money is lent back out for investments but that is not the same as a group of investers developing apartment buildings like they did in the '60's and 70's because the TAXES were higher and the WRITE OFFS were more crucial. With today's low top tax rate there is little incentive for the risk of investing in infrastucture.

It is cash GDP that is now removed from the economy b/c our tax rates are too low.

High taxes on the wealthiest stimulates the economy by the taxpayers' investments using deductions / write-offs to recirculate profits.

If the taxes are too low, they'll just bank the profits.

Extreme example: Elon Musk's investments in Space X were write offs for him that he hopes will make even more money for him in the future.

Or, someone making 5 million a year would still find ways to write off / deduct / invest rather than paying 70% Income Tax on that 5 million every year. But at 35%? Why bother, just bank it.

[oldsoftie]

45. You have it totally backwards.

They're simply not going to pay high rates. The "why bother" is why bother to pay an army of accountants to get out of paying 35%. They certainly WILL to get out of paying 70%. The super rich hold very little actual cash relative to their worth. No return. Sure they've got a few million stashed. But not 100s of millions. Now businesses? Yeah they stash billions.
What difference does it make what the rate is if no one PAYS it? Hell, make it 95%. REVENUE is all that matters.

[wolfie001]

35. Please start with.....

....baldy Jeff Bozos.

[robodruid1]

43. Excellent

Make them pay.