The House Democrats’ plans to raise taxes for the wealthy and profitable businesses stop long before the big proposals many party members once considered to tax the vast fortunes of tycoons like Jeff Bezos and Elon Musk – or even fill in the gaps exploited by senior leaders. flying captains of finance.
Instead, the House Ways and Means Committee, influenced more by the need to win the votes of moderate Democrats than by progressive Democratic ambitions, focused on traditional ways of increasing incomes to pay for the the party’s $ 3.5 trillion social policy bill – by increasing income tax rates.
The proposal, which is due to be considered by the panel on Wednesday, includes measures to raise taxes for the rich. Taxable income over $ 450,000 – or $ 400,000 for unmarried individuals – would be taxed at 39.6%, the highest rate before President Donald J. Trump’s 2017 tax cut brought it to the fore. at 37%. The highest capital gains rate would drop from 20% to 25%, a considerably smaller jump than that proposed by President Biden.
A 3% surtax would be applied to income over $ 5,000,000.
But more notable is what is not included. The richest of the rich make little money on actual paychecks (Amazon’s Mr Bezos’ salary was $ 81,840 in 2020). Their immense fortunes in stocks, bonds, real estate and other assets grow each year largely tax-sheltered.
The Senate Finance Committee wants to tax this wealth with a single surtax imposed on the fortune of billionaires, followed by annual levies on the capital gains of billionaires, in the same way that property taxes are adjusted each year to reflect the housing value gains. The Ways and Means Committee shrugged its shoulders.
Representative Bill Pascrell, a Democrat from New Jersey and a member of the Ways and Means Committee, acknowledged Monday that the country’s real wealth is tied to assets, not big wages, but said many Democrats feared d ‘to go too far.
“I am very suspicious of a wealth tax,” he said. “I think it’s perceived as ‘soaking the rich’. I don’t think it is, but that is how it is viewed.
The committee did target a loophole in retirement savings exploited by billionaire Peter Thiel, who, according to a ProPublica investigation, was able to take out a Roth individual retirement account worth less than $ 2,000 in 1999. and increase it to $ 5 billion, which could be completely tax-sheltered.
In a Roth IRA, small annual deposits of money from previously taxed income are allowed to increase in value without tax on capital gains, as long as the funds are withdrawn after retirement. But Mr Thiel, the founder of PayPal and a prominent Silicon Valley conservative, opened up his Roth, then filed stakes in start-ups at fractions of pennies a share, which then exploded when start-ups took off. Gains in value – and investments made in other companies from those gains – will be fully tax exempt if Mr Thiel waits to withdraw them just before he turns 60.
To prevent such exploitation, the Ways and Means Committee would stop contributions to retirement accounts once they reach $ 10 million.
In other areas, the committee seems to only glance at the country’s top airmen. Barack Obama, Mr. Trump and President Biden have all pledged to close the so-called deferred interest loophole, in which private equity managers pay low capital gains tax rates on fees they charge to companies. clients, claiming that it is not income because it is earned. investment gains of their clients.
Senate Democrats hope to close the loophole completely, saving the Treasury $ 63 billion over 10 years. The House proposal would require Wall Street financiers to hold onto their clients’ investment gains for five years before claiming them as capital gains and cashing them out, a request that could limit the use of deferred interest, but allow to save a fraction of the Senate proposal, $ 14. billion.