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Democrats’ new tax proposal targets businesses and wealthy Americans

House Democrats want to raise taxes on the biggest corporations and wealthiest Americans to help pay for the $ 3.5 trillion budget reconciliation program. The series of proposed tax code changes are expected to spark a heated debate on Capitol Hill as Republicans and some centrist Democrats push back on the sweeping spending proposal that addresses a range of President Biden’s political priorities.

The House Ways and Means Committee responsible for drafting the financing proposal unveiled its text on Monday. It comes as the committee prepares to annotate the legislation on Wednesday, the same day that President Nancy Pelosi set a deadline for all committees to complete their drafted portions of the legislation.

House Democrats are proposing to increase the corporate tax rate to 26.5%, from 21% for companies with revenues over $ 5 million. At the same time, they proposed to lower the tax rate even further for smaller businesses that earn up to $ 400,000 at 18%. Companies with incomes in the middle range would not see a corporate tax hike.

It stands out just below President Biden’s own proposal unveiled this spring. He called for the tax rate to be raised to 28% after it was reduced from 35% to 21% under President Trump in 2017.

The proposal also revamps the tax brackets for the richest Americans, increasing the top tax rate to 39.6% from 37%, which applies to people with taxable income above 400,000. $, to married people declaring jointly with taxable income greater than $ 450,000 and to heads of household. with taxable income greater than $ 425,000.

Under the proposal, the maximum capital gains rate would be reduced from 20% to 25%. That’s less than the president’s proposal to almost double the rate to 39.6% for households with incomes over $ 1 million. Instead, the proposal includes a 3% surtax on individuals earning more than $ 5 million.

Another proposal in the bill increases the tax rate on tobacco products.

White House spokesman Andrew Bates praised the proposal, noting that it “makes significant progress in ensuring that our economy rewards work and not just wealth by reducing taxes for families of the middle class ; reforming the tax code to prevent the offshoring of American jobs; and making sure that the richest Americans and big business pay their fair share “and meets two of the President’s fundamental goals.

While the legislation includes changes to the tax code, it also includes $ 80 billion in funding for the IRS over the next decade, which would increase law enforcement on wealthier Americans.

According to the Treasury Department, the richest 1% have avoided paying around $ 163 billion in taxes per year. The total tax gap between what is owed and what is actually collected is estimated at $ 600 billion per year and could reach around $ 7 trillion over the next ten years. The increased funding for the IRS would raise an additional $ 200 billion over a decade, estimates the Congressional Budget Office.

According to a document on the House Democrats’ tax proposal circulated to lawmakers and obtained by CBS News, the series of tax changes and provisions would generate an estimated $ 2.9 trillion in revenue, with an additional $ 1 trillion coming from most individuals. rich and an additional $ 900 billion from corporations. .

Along with the estimated $ 600 billion growth of the White House, the document said, the proposal would fund the $ 3.5 trillion spending plan, which includes provisions such as expanding Medicare, l ‘extension of the monthly child tax credit, the implementation of a family and medical plan paid for 12 weeks. nationwide leave policy, offering universal pre-kindergarten to all 3- and 4-year-olds, making two years of community college education free and more.

But the tax and spending agenda still has a long way to go on Capitol Hill. On Tuesday and Wednesday, the House Ways and Means Committee will continue its work by marking its part of the legislation, known as the Build Back Better Act. In a statement, President Richard Neal said his investments can all be funded “responsibly” and taken together, the proposals “expand opportunities for the American people and support our efforts to build a healthier and more prosperous future for them. the country “.

But over the weekend, Senator Joe Manchin continued to pour cold water on the $ 3.5 trillion reconciliation package, saying Senate Majority Leader Chuck Schumer would not have his vote on a package of this size. The West Virginia Democrat suggested Congress should cut back to meet urgent needs, starkly at odds with progressive Democrats such as Sen. Bernie Sanders, who said on Sunday that reducing the package to 1.5 trillion dollars was “absolutely unacceptable” to him.

Democrats have 50 seats in the Senate, leaving no room for dissent. The Senate returns from vacation Monday.