The House Ways and Means Committee on Monday released legislation aimed at paying for Democrats’ $3.5 trillion in social spending priorities, including by raising the corporate tax rate to 26.5 percent.
The legislation includes a host of tax increases focused on high-income individuals and corporations. It would increase the top capital gains rate from 20 percent to 25 percent, raise the top individual tax rate from 37 percent to 39.6 percent and impose a 3 percent surtax on individuals’ income above $5 million.
The legislative text is part of a wide-ranging bill that includes spending and tax cuts in areas such as child care, health care and renewable energy. The Ways and Means Committee started considering its portion of the bill last week and is scheduled to continue its markup on Tuesday and Wednesday.
Democrats are proposing to replace the current flat corporate rate of 21 percent with a graduated corporate rate structure. The first $400,000 in corporate income would be taxed at 18 percent, income between $400,000 and $5 million would be taxed at 21 percent, and income above $5 million would be taxed at 26.5 percent.
On capital gains, House Democrats’ proposed rate increase to 25 percent is a substantially smaller rate hike than Biden’s proposal to tax capital gains at the same rates as ordinary income. The Ways and Means Committee’s bill also does not propose to tax capital gains at death, an idea that is supported by Biden and some Democratic lawmakers but has drawn criticism from Democrats representing rural areas. However, the committee does propose changes to the estate tax.
The Ways and Means Committee’s proposal also includes international tax changes, increased tobacco taxes, limits on a deduction for noncorporate business income for high-income households, and changes to rules for Individual Retirement Accounts for high-income households.
Additionally, it would provide the IRS with nearly $80 billion in order for the agency to bolster tax enforcement activities and update its information technology.
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