House Dems Plan To Hike Capital Gains Tax To Pay For Biden Spending Package
House Democrats are plotting to raise the capital gains rate as one of several mechanisms to raise trillions of dollars for their new spending package.
The current proposal is that the capital gains rate for high-income individuals be increased from 20% to 25%, a number that falls short of President Joe Biden’s initial pitch to hike the rate by nearly double to 39.6%.
When factoring in an existing Obamacare surtax on investment income, people making over $1 million would pay an effective rate of 28.8%. By raising the capital gains rate, Democrats hope to raise $123 billion, according to an information sheet that leaked to the media.
The capital gains increase is more modest than initially proposed. The lower-than-expected rate is also a sign that there is concern that more centrist members of the party might be reticent to vote on the legislation if its tax overhauls are more drastic.
The increase in the capital gains tax is one of several revenue-raising measures that Democrats are planning to introduce.
Democrats also want to increase the top tax rate on individuals making over $400,000 per year to 39.6%, up from the current 37% rate. This would also apply to married couples filing jointly who earn over $450,000 annually.
Leadership also wants to raise the corporate tax rate to 26.5% from 21%, which is also scaled back from the White House’s original proposal to raise the corporate tax rate up to 28%.
Democrats need every vote they have in the Senate and can’t afford to lose more than a few votes in the House to ram through the legislation.
In addition to raising revenue through increased tax enforcement, the party is also proposing a new surtax on those who make more than $5 million. Those earners would pay an additional 3% tax, which would raise an estimated $127 billion.
All total, Democrats think the entire menu of tax proposals would raise some $2.9 trillion over the coming decade. They think that the entire $3.5 trillion would be paid for when dynamic scoring, the notion that the policy changes would accelerate economic growth and allow the government to collect increased revenue from that prosperity, is factored in.
While the spending package is coming together quickly, there is still a long way to go before it is a final bill on the president’s desk.
Some more centrist Democrats have expressed hesitance about the possible price of the bill and are hoping to see it paid for. Sen. Joe Manchin has said he thinks the price tag of $3.5 trillion is too high and signaled that he would be more inclined to vote for a pared-back package that clocked in closer to $1.5 trillion.
The West Virginia Democrat’s unease with the massive spending package has generated some backlash within his own party, with independent Sen. Bernie Sanders of Vermont calling his colleague’s position “not acceptable.”
Author: Zachary Halaschak
Source: Washington Examiner: House Democrats plan to hike capital gains tax to pay for Biden spending package