Democrats are considering a slew of tax hikes in their $3.5T budget reconciliation bill
Democratic leaders have said the massive bill is going to be fully paid for, but the Committee for a Responsible Federal Budget estimated that it will add $1.75 trillion to deficit over a 10-year period.
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The Democrat-led Congress has passed a $3.5 trillion budget reconciliation framework that is likely to include a host of tax increases to cover the substantial costs associated with new social safety net programs in the final bill.
House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer have said they're aiming to pass the budget reconciliation bill in the fall. Budget reconciliation allows the Democrats to move the budget bill to passage along a party-line vote without GOP votes.
Democratic leaders have expressed support for raising the corporate tax rate from 21% to 28%, increasing the top income tax for individuals and families to 39.6% and doubling the current capital gains tax to 43.4%.
The Biden Administration has proposed a capital gains tax that would be applicable at death with an exemption of up to $1 million. The administration is also considering a 15% minimum tax on book income that applies to corporations that meet certain income requirements.
According to the Tax Foundation, potential health care-related revenue that Democrats want to raise under the budget bill would stifle U.S. medical innovation.
"Under H.R. 3, if drug manufacturers do not agree to participate in negotiations, or do not agree to the negotiated price, they would be subject to an escalating excise tax on the sale of the drug in question," said the Tax Foundation. "The tax would kick in at 65 percent and would rise by 10 percentage points each 90 days the manufacturers are in 'noncompliance,' reaching a maximum tax rate of 95 percent."
Democrats in Congress have floated the idea of a methane tax and carbon border tax.
"The principle here is at least a methane fee, some kind of border adjustment, although there are serious technical challenges there," Sen. Brain Schatz (D-Hawaii) said. "Our major hurdle is how to make it operate properly."
In addition to these new taxes, Senate Democrats have introduced legislation titled the Polluters Pay Climate Fund Act, which would require "the largest U.S.-based fossil fuel extractors and oil refiners and foreign-owned companies doing business in the U.S. to pay into a Polluters Pay Climate Fund based on a percentage of their global emissions."
The reconciliation bill could also include an international tax reform proposal put forth by Democrats on the Senate Finance Committee.
"If the U.S. were to remove the tax benefit from FDII [Foreign Derived Intangible Income] and companies then chose to move their IP offshore to benefit from a foreign patent box, the U.S. could lose out on investment and jobs related to R&D in addition to some tax revenue from the IP profits," the Tax Foundation reported.
Democratic leaders have said the massive reconciliation bill is going to be fully paid for, but the Committee for a Responsible Federal Budget estimated that it will add $1.75 trillion to the federal deficit over a 10-year period.
The Senate also passed a separate $1.2 trillion infrastructure bill that the CRFB estimated will add $400 billion to the deficit over the next decade. The legislation contains a new tax reporting requirement for cryptocurrency transactions.