US President Joe Biden and the Democrats are preparing a major tax hike, primarily for wealthy Americans and corporations. Investments and financial transactions taxes may be on the agenda.
After his first major victory – the passage of a major bill worth $ 1.9 trillion. to help the economy in the face of the COVID-19 pandemic, Joe Biden’s team is preparing to start fulfilling other campaign promises.
Biden’s plans include the first major federal tax hike since 1993, aimed at making the US tax code more progressive and attracting additional funds to the budget for the implementation of large new long-term infrastructure and climate programs. Biden’s campaign program also included a lot of aid to poor Americans.
In addition, the Democrats of the House of Representatives advocated raising the minimum wage of Americans to $ 15 per hour, but the measure was rejected in the Senate, as Republicans pointed to the US budget deficit and the growing state. debt.
Treasury Secretary Janet Yellen said US lawmakers are now preparing to introduce a series of measures that could include raising both the corporate tax rate and the individual rate for high-income people.
The Democrats will reportedly propose:
an increase in the corporate tax rate from 21% to 28% for enterprises such as limited liability companies, partnerships and sole proprietorships, whose owners or members pay individual income tax;
an increase in the income tax rate for individuals earning more than $ 400 thousand per year;
an increase in the capital gains tax rate for individuals earning at least $ 1 million per year;
shifting from gasoline tax to mileage tax to help finance road projects.
Senate Finance Committee Chairman Ron Wyden has proposed requiring investors to regularly pay taxes on their investments, including stocks and bonds that have unrealized gains.
House of Representatives Financial Services Committee Chair Maxine Waters said she would like to address the issue of a financial transactions tax.
More complete and accurate information is not yet available, since the general program has not yet been made public, but analysts suggest that the program could raise from $ 2 to $ 4 trillion. to the US budget.
No date has yet been set for the announcement, although the White House said the plan will be implemented after the Covid-19 relief bill is signed into law.
At the same time, investors should understand that changes to the tax code will not be adopted overnight, this will be preceded by long debates, both in the upper and lower chambers.
The plan to raise taxes will be a new test for Biden’s team, which will need to not only win favor with Republicans, but maintain a unity of position among Democrats. Democrats will need the votes of at least 10 Republicans to pass the bill.
Last month, Republican Senate Minority Leader Mitch McConnell said, “We’re going to have a serious discussion about the desirability of a large tax hike.”
Kevin Brady, the top Republican on the House committee, said, “There seems to be a real trend towards taxing investments and capital gains,” and called it “a terrible economic mistake.”
In terms of timing, the new tax measures likely won’t take effect until 2022, as lawmakers will advocate for an initial labor market recovery after the pandemic.