After months of negotiations, the House passed the Democrats’ sweeping $1.9 trillion budget reconciliation package on Friday.
The bill, which now goes to the Senate, would transform the nation’s social safety net despite being whittled down to roughly half its original size amid infighting between the party’s moderate and progressive wings.
The Democrats fractured over measures to cover their original sweeping $3.5 trillion spending proposal.
Initial plans to make companies and well-off Americans pay by raising the corporate tax rate and the top marginal individual income and capital gains rates were scuttled by Democratic moderate Sen. Kyrsten Sinema of Arizona.
The party then floated a billionaire tax on the capital gains of the super-wealthy, but that quickly withered after resistance from Sen. Joe Manchin of West Virginia, another key Democratic moderate, and several others in the Senate and House.
Biden and congressional Democratic leaders ultimately settled on a mix of corporate and individual revenue raising measures, along with two prescription drug provisions.
Under the House version, most middle-income families with children would get a tax cut in 2022 — thanks to an expanded child tax credit — and those without kids would generally see little change in their tax bills, according to an analysis by the nonpartisan Tax Policy Center.
Overall, nearly 40% of households would see a tax cut and nearly 19% would pay more in 2022 than they do now, according to the analysis. However, about 70% of those earning more than $1 million a year would enjoy a tax cut.
Here a look at some of the key measures to cover the plan:
Corporate taxes: The bill would put in place a 15% minimum tax on the corporate profits that large companies report to shareholders, not to the Internal Revenue Service. This would apply to companies with more than $1 billion in profits. The legislation also includes a 1% surcharge on corporate stock buybacks.
Also, it would impose a 15% minimum tax, calculated on a country-by-country basis, that American companies pay on foreign profits, consistent with an agreement Biden recently won among 136 countries. The provisions would yield an estimated $814 billion, the Joint Committee on Taxation said.
Taxes on the rich: The wealthiest Americans would pay a 5% surcharge on income above $10 million, and an additional 3% levy on income above $25 million.
Next year, about 30,000 tax filers are expected to make $10 million or more, according to the Tax Policy Center. About 12,000 of them are likely to earn at least $25 million.
The bill would also close the loopholes that allow some affluent taxpayers to avoid paying the 3.8% net investment income tax on their earnings. And it would continue the limitation on excess business losses. This measure would raise $640 billion, the committee estimates.
IRS enforcement: The bill would beef up IRS enforcement so that it can ensure that people are paying what they owe to Uncle Sam. The new enforcement measure would focus on Americans with the highest incomes, not those earning less than $400,000 a year.
The CBO estimates that the provision would raise revenue by $207 billion — far less than the $400 billion that the Treasury Department had projected. But White House officials have been arguing for weeks that the numbers would not line up due to methodological differences, criticizing the way the CBO accounts for the indirect effects the enhanced enforcement would have.
Read more about the costs and payment measures here.
Source: www.cnn.com