New Direction for Potential Tax Legislation?
Authored by Miryam Wisnicki, Melissa Labant, and Chris Hesse
After a week of backdoor negotiations between President Biden and key Democrat holdouts Senators Joe Manchin and Kyrsten Sinema, the White House and progressive Democrats appear prepared to compromise on some significant priorities in order to cobble together a social spending package that can pass Congress. Speaker Pelosi expects an agreement to be reached on the framework of the reconciliation bill by the end of the week.
The most recent negotiations appear to take a new direction on the relevant “pay-fors” for the social spending package. Late last week, the White House indicated that Senator Sinema would not support any increases in corporate or individual tax rates. Since the Democrats need the vote of every Democratic and Independent member in the Senate (or they would need to pick up the vote of a Republican member – which seems unlikely), the legislative road comes to an end if they cannot get her support. This means a final agreement is unlikely to include any increase in the corporate income tax rate or the top marginal individual income tax rate. (Yes, this is a complete shift in direction from where discussions were headed just a week ago.)
However, Democrats continue to look at a range of proposals to raise taxes on corporations and wealthy individuals outside of direct tax rate increases. Some of the proposals floating around in Congress that may serve as replacements include a tax on billionaires, a minimum book tax on corporations, increased taxes on multinational companies, a stock buyback excise tax, as well as increased IRS audits of the wealthy and reporting of aggregate inflows and outflows from bank accounts. Senator Wyden, chairman of the Senate Finance Committee, is in the process of drafting details of the billionaire tax proposal, a plan expected to tax the unrealized gains of billionaires and other ultra-high earners. Some have questioned the constitutionality of a tax on unrealized gains, raising the issue of whether such gains are income before they are realized. It is unknown at this time what other revenue raisers Senator Sinema may be willing to support.
The recent pressure to get something done comes as the President prepares to embark on his overseas trip to Europe, two upcoming tight gubernatorial races and the expiration of the highway funding. While there are still a number of unsettled provisions, particularly with regards to tax increases, Democratic leaders are eager to reach an agreement on the framework in the coming days. (That’s just the overarching agreement though. They would still need more time to work out all of the details.)
If progressive Democrats are comfortable that a final deal on the social spending package is within reach, the physical infrastructure bill could be passed by the House and signed into law as early as this week. The Senate passed the bill back on August 10th.
We expect negotiations and the fleshing out of the proposals to continue to pick up speed. Plan to join our CLA Livestream on November 4th for a live discussion on where the negotiations stand.
Is it going to kill 4th qtr ERC ?