Joe Biden entered the White House on the promise of hitting the richest Americans with higher taxes to fund trillions of dollars in social spending and drive the benefits of American fiscal policy away from Wall Street.
But as negotiations in Congress on Biden’s tax proposals enter the home stretch, influential Democrats from the president’s own party are trying to soften them, heralding a possible respite for America’s financial sector and some of the households. More rich.
The maneuver on Capitol Hill over Biden’s tax increases comes as Democratic lawmakers plunge into the most difficult phase of their effort to pass the president’s signature economic package: a $ 3.5 trillion expansion investment in education, children’s health care and green energy.
It is the scenario in which high-level legislators and their staff have to translate their lofty aspirations into concrete text, under heavy pressure from pressure groups and with high political stakes for both the White House and Party members. Democrat.
This week, Richard Neal, a Massachusetts Democrat and the top tax writer in the House of Representatives, unveiled his $ 2.9 trillion plan in tax increases to fund Biden’s $ 3.5 trillion package, finally shedding light on your intentions and the specifics of a possible intra-match. commitment.
Neal’s proposal includes an increase in the maximum tax rate on personal income from 37% to 39.6%, but moves away from targeting capital gains taxes more aggressively, the source of a much of the wealth for millionaires and billionaires.
Biden wants to increase the capital gains tax from 20% to 39.6%, ending preferential treatment of windfall earnings compared to earned income. But Neal’s plan would raise it to just 25 percent.
Neal also doesn’t ask for unrealized capital gains of more than $ 1 million at death, which the White House supports, to be taxed. And while his plan tightens the preferential tax treatment of “booked interest,” a great source of income for private equity executives, it does not eliminate it entirely.
“Frankly, this is a humiliating decline in management’s stance,” said James Lucier, an analyst at Capital Alpha Partners in Washington. “This avoids most of the things Wall Street is concerned about.”
White House officials have praised Neal’s plan as a step forward in the complex political process of passing Biden’s spending plan without any Republican support and only the smallest of Democratic majorities in both houses of Congress.
They say that while Biden had proposed a different structure, Democratic tax lawmakers in the House were still meeting the basic goal of increasing the amount of taxes paid by corporations and Americans who earn more than $ 400,000 per year.
Furthermore, there are still many rounds of negotiations ahead, both with the White House and with the Democrats in the Senate, where Ron Wyden of Oregon, the top tax writer in the upper house, is more progressive than Neal.
However, the changes to Biden’s tax plan proposed in the House highlight the extent of backlash among donors, lobbyists, and Democratic voters who have opposed the president’s efforts to tax wealth, especially capital gains. .
Many Democratic lawmakers in urban and suburban districts in New York, New Jersey and California have been wary of the biggest tax increases for the wealthy. They were already pushing the White House to repeal a cap imposed by Donald Trump on a state and local tax break that primarily benefits the wealthy.
But vulnerable Democrats in key swing districts across the country also have doubts about Biden’s tax plans, fearing they will hurt family businesses, including farms, and make it easier for Republicans to label the party radical.
Neal and most mainstream Democrats are willing to do some real tax increases, but chasing unrealized wealth is not their primary goal. It’s not a fight they think is worth having when they have to defend seats. [in the 2022 midterm elections]”Said Ben Koltun, head of policy research at Beacon Policy Advisors in Washington.
“They don’t want to take more medication than is necessary to reap the benefits,” he added.
Neal proposed a 3% surtax on revenues above $ 5 million, an alternative way to hit the super-rich and a nod to the progressive wing of the party, but that is still considered insufficient on the left.
“The Neal plan really fails to properly tax wealth and the passing on of wealth,” said Niko Lusiani, director of corporate power at the Roosevelt Institute.
Lusiani said that not taxing capital gains at death was “equivalent to rebuilding unevenly, rebuilding in a bifurcated fashion,” adding: “It maintains the same dynastic wealth that is so divisive in our economy.”
Many liberal lawmakers have called for a full-blown estate tax, although Biden has never wanted to go that far.
On the corporate side, Neal did not adopt a plan announced by Wyden on Friday that would impose a surcharge on the shares. buybacks by the largest companies. House Democrats too proposed raise the corporate income tax rate to 26.5 percent from 21 percent, below the 28 percent level expected by the White House.
But despite its difference from Biden’s plan on several fronts, Democrats don’t expect Neal’s plan to gain much traction among Republicans or business groups.
Many criticized it after it was published this week, with Neil Bradley of the US Chamber of Commerce calling it “an existential threat to America’s fragile economic recovery and future prosperity.”
Some observers in Washington predict that tax provisions could be cut further as the talks progress.
“The fact that Democrats have tried to move the fiscal plan in a more moderate direction is a tacit recognition that the policy is much more deceptive than they pretend,” said Ken Spain, a Republican strategist.
“Raising taxes always sounds great to some on paper, but it is a much more complicated exercise when it comes to doing it. Once people start realizing how it’s going to affect them, it becomes a much more live-fire exercise. “
Rana Foroohar and Edward Luce discuss the most important issues at the intersection of money and power in American politics every Monday and Friday. Sign up for the newsletter here