This week, House Democrats unveiled their plan to hike taxes on wealthy people and corporations to help offset the costs of the $3.5 trillion reconciliation bill. However, progressive lawmakers noted an omission to the tax reform plan: a wealth tax.
The reconciliation plan, which can pass through the Senate with a simple majority vote bypassing the filibuster, is one of the Democrats’ only chances to pass ambitious tax bills like a wealth tax or more moderate reforms, like undoing the Donald Trump tax cuts of 2017. Considering the widespread tax evasion and surging wealth among the most prosperous Americans, progressives and some Democrats say that the reconciliation bill is a chance to seize the Democratic majority and pass ambitious tax reform.
As it is, there are few, if any, tax proposals in the plan that target the ultra-wealthy, which Finance Chair Sen. Ron Wyden (D-Oregon) told the New York Times is a missed opportunity. “It would be a monumental mistake for Congress to pass a bill that really exempts billionaires,” Wyden said.
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Sen. Elizabeth Warren (D-Massachusetts) echoed that sentiment on Tuesday. “I agree with Chairman [Wyden]: we need to pass a bill that ensures that billionaires and corporations are finally paying their fair share,” she said on Twitter.“A wealth tax and my Real Corporate Profits Tax are two ways to get that done.”
Warren has previously proposed a tax on the ultra-wealthy that would levy a 2 percent tax on wealth between $50 million and $1 billion, and a 3 percent tax on wealth over $1 billion. In her Real Corporate Profits Tax Act, she has also proposed creating a tax on profits that companies report to shareholders, rather than profits reported to the government, which companies typically deflate in order to dodge taxes.
Warren wrote last month that her wealth tax, corporate profits tax and funding for the Internal Revenue Service (IRS) could fund the entirety of the reconciliation bill. But it’s not necessarily just about revenue-raising for her and progressive lawmakers; it’s also about making corporations and the wealthy pay their “fair share,” as progressives have been advocating for.
As it stands, the Democrats’ plan includes moderate tax hikes on the upper class, including an increase on the marginal top tax rate for people making over $435,000,from 37 percent to 39.6 percent. The plan also adds a 3 percent surtax for incomes higher than $5 million.
Aside from ending a high estate tax exemption threshold set by Trump, however, there is little in the way of taxing anything other than incomes. That means the tax plans wouldn’t capture the enormous wealth from things like stock trading and bonuses that the richest Americans accrue while often collecting a low salary: for instance, Jeff Bezos’s base salary is just over $80,000, but he receives billions of dollars a year from other sources.
Advocates have criticized the tax plan, not only for leaving out a wealth tax but also for the proposals it does include. The tax hikes fall short of what Biden had proposed in the spring, and even further away from what progressives and some Democrats have been advocating for.
The plan includes a corporate tax hike as President Joe Biden proposed earlier this year, but it’s an even smaller proposal than Biden’s modest original hike. Instead of raising the corporate tax rate from 21 to 28 percent, as Biden proposed– or 35 percent, which was the rate before Republicans slashed it in 2017 — Democrats are offering a 26.5 percent rate. Meanwhile, the plan’s capital gains tax hike, from 20 to 25 percent, is far smaller than the near doubling of the capital gains tax that Biden had proposed.