House Democrats Propose $3.5 Trillion Plan
Tax Rate on Companies, Wealthy Individuals Set to Rise
House Democrats unveiled several proposed tax increases on corporate America and the nation’s wealthiest individuals. These tax hikes would pay for a $3.5 trillion bill aimed at expanding the social safety net and fighting climate change.
Under the plan, the tax rate for corporations would jumpto 26.5% from 21%. For the highest-earning households, the top marginal rate would increase to 39.6% from 37%, and anyone making over $5 million would be hit with a 3% surcharge. The capital gains tax rate would be lifted to 25%. The tax proposals, which still have to make their way through Congress, do not go as far as President Joe Biden had originally called for. He wanted the corporate tax rate to increase to 28% and the capital gains rate to rise to 39.6%.
Capital Gains Tax Could Be As Much As 28.8%
The proposed tax legislation would effectively raise the capital gains tax to as much as 28.8% when the new 25% tax rate is combined with a 3.8% investment-income tax already on the books. It would go into effect in the tax years that end after today. The House Democrats’ proposal is a bit of a relief for investors. Under Biden’s plan, the top tax rate would have been 43.4%.
The new rate applies to individuals earning $445,850 or more and married joint filers making over $501,600. The increase in the capital gains tax is estimated to raise $322.5 billion in the next ten years.
Tax Bill May Change During Debate
The House Democrats’ tax proposal has a long way to go before it would go into effect. It could look a lot different if and when it passes. Democrats hope to pass a bill in the next few weeks and will need the support of the full caucus in the Senate and nearly all the Democrats in the House.
While Democrats agree in principle about the need to spend more on social programs and climate change, expect a lot of wrangling from more centrist lawmakers who favor smaller tax increases.
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