Manchin-Schumer deal drops most plans to increase taxes on the rich
The Inflation Reduction Act presents a slimmed down version of the Biden plan
A compromise spending package negotiated between Senate Majority Leader Chuck Schumer and West Virginia Democratic Sen. Joe Manchin reportedly eliminated many of the revenue proposals to increase taxes on higher income earners that the original plan included.
The deal has eliminated earlier proposals to raise the top income tax rate from 37% to 39.6%, impose a 3% surtax on those with $5 million or more annual income, and raising the capital gains tax to 25%, according to The Hill. President Joe Biden's initial Build Back Better plan had included all of those revenue items.
The Inflation Reduction Act presents a slimmed down version of the Biden plan and does not close the net investment income tax loophole.
“President Biden, in his campaign, in his budgets, proposed a substantial amount of tax increases on high-income people,” analyst Howard Gleckman of the Tax Policy Center said, per The Hill. “It included this idea of expanding the net investment income tax, which was a provision in the 2010 Affordable Care Act that would have extended a 3.8 percent tax to certain kinds of businesses that were not subject to the original one.”
Manchin initially balked at the legislative package, citing fears it would make inflation worse. He changed his tune in late May, saying that he and Schumer had agreed on a string of tax and environmental provisions that would allow him to support the proposal. The West Virginia Democrat reportedly secured promises from his party to advance energy projects of benefit to his state in exchange for his support.
His vote is critical to the proposal's future as the Democrats currently must navigate an evenly divided Senate and any opposition within their own party would effective stop a legislative item in its tracks. Arizona Democratic Sen. Kyrsten Sinema, meanwhile, remains uncommitted to the plan and has previously expressed opposition to certain provisions within it.