“Humiliating climb”: Centrist Democrats weaken Biden’s tax increase

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When Joe Biden entered the White House, he promised to hit the wealthiest Americans with higher taxes in order to fund trillions of dollars in social spending, while tilting the benefits of US fiscal policy away from Wall Street.

But as Congress’s negotiations on Biden’s tax proposals have entered the final stage, influential Democrats from the president’s party are trying to downplay these proposals, which indicates that the US financial industry and some of the wealthiest families may receive Ease.

Capitol Hill’s strategy for Biden’s tax increases comes at a time when Democratic lawmakers are sneaking into the most difficult phase of their efforts to pass the president’s iconic economic plan. $3.5tn expansion Investment in education, childcare and health care and green energy.

This is the stage where senior lawmakers and their staff must translate their lofty wishes into concrete texts, under heavy pressure from lobbyists, and the high political stakes of the White House and Democratic members.

This week, Richard Neal, a Massachusetts Democrat and chief tax writer for the House of Representatives, announced his $2.9 trillion tax increase plan to fund Biden’s $3.5 trillion package, finally clarifying his intentions and potential. Compromise on specific details within the party.

Neal’s proposal includes raising the maximum personal income tax rate from 37% to 39.6%, but avoiding more aggressive taxation of capital gains, which are a huge source of wealth for millionaires and billionaires.

Biden hopes to increase Capital gains tax Increased from 20% to 39.6%, ending the preferential treatment of windfalls compared to earned income. But Neal’s plan will raise it to only 25%.

Neal also did not call for a tax on unrealized capital gains exceeding $1 million at the time of death, and the White House expressed support for this. Although his plan strengthened the preferential tax treatment of “carried interest” (an important source of income for private equity executives), it did not completely eliminate it.

James Lucier, an analyst at Capital Alpha Partners in Washington, said: “Frankly, this is a humiliating setback of the government’s posture.” “This avoids most of the things Wall Street is worried about.”

White House officials praised Neal’s plan as a step forward in a complicated political process. Biden’s spending plan does not have any Republican support, and only has the weakest majority of Democrats in both houses of Congress.

They said that although Biden proposed a different structure, the Democratic tax lawmakers in the House of Representatives are still achieving the basic goal of increasing the amount of tax paid by companies and Americans with an annual income of more than $400,000.

In addition, multiple rounds of negotiations with Democrats in the White House and Senate are still ongoing, and Ron Wyden of Oregon, the chief tax writer of the House of Lords, is more progressive than Neal.

Nonetheless, the changes to the Biden tax plan proposed by the House of Representatives highlight the strong opposition of Democratic donors, lobbyists, and voters, who are hesitant to tax the president’s efforts to tax wealth—especially the taxation of capital gains.

Many Democratic lawmakers in the cities and suburbs of New York, New Jersey, and California have been cautious about the most drastic tax increases for the rich. They are already pushing the White House to abolish Donald Trump’s caps on state and local tax relief that are mainly beneficial to the wealthy.

But weak Democrats in important swing areas across the country also have doubts about Biden’s tax plan because they fear it will hit family businesses including farms and make it easier for Republicans to label the party radical.

“Neil and most mainstream Democrats are willing to make some real tax increases, but the pursuit of unrealized wealth is not their main goal. When they have to defend their seats, this is not a battle they think is worth fighting. [in the 2022 midterm elections],” said Ben Koltun, director of policy research at Beacon Policy Advisors in Washington.

“They don’t want to take more drugs than they need to get good things,” he added.

Neal did propose to impose a 3% surcharge on income exceeding $5 million. This is another way to crack down on the super-rich and an endorsement of the progressives in the party, but this is still not enough from the left.

Niko Lusiani, director of corporate power at the Roosevelt Institute, said: “The Neal Plan did not properly tax and transfer wealth.”

Luciani said that failing to tax capital gains at the time of death “is tantamount to rebuilding inequality and rebuilding differences”, adding: “It retains the same dynasty wealth that is so divided in our economy.”

Many liberal lawmakers called for a comprehensive wealth tax, even though Biden never wanted to go that far.

On the company side, Neal failed to accept a plan announced by Wyden on Friday that would impose additional taxes on stocks. Repurchase By the largest company.House Democrats also suggested Raise the corporate income tax rate from 21% to 26.5%, which is lower than the 28% hoped by the White House.

However, although it differs from Biden’s plan in several ways, Democrats do not expect Neal’s plan to gain much traction among Republicans or business groups.

Many people slammed it after it was published this week, and Neil Bradley of the American Chamber of Commerce called it “an existential threat to America’s fragile economic recovery and future prosperity.”

Some observers in Washington predict that as the negotiations progress, tax provisions may be further cut.

“The fact that the Democrats are trying to push the tax plan in a more modest direction shows that politics is much trickier than they thought,” said Republican strategist Ken Spain.

“For some people, increasing taxes always sounds great on paper, but in fact doing so is a much more complicated task. Once people start to realize how it will affect them, it becomes even more complicated. It’s like a live ammunition exercise.”

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