Democratic lawmakers are debating a series of tax proposals targeting companies and the highest incomes in the United States, including levies on share buybacks, carbon emissions and executive compensation, according to Bloomberg.
The measures in mind go beyond those proposed by the country’s president, Joe Biden, to help finance an increase in spending on social programs worth $ 3.5 trillion.
One of the ideas on the mind of the Democratic senators is to apply a special tax to share buybacks or treat them as taxable dividends to shareholders, according to two people familiar with the ongoing debates of the Senate Finance Committee.
Companies’ deductions for executive compensation could also be limited while top managers could face a special tax if their compensation exceeds that of an average company worker by a certain proportion.
The fiscal options considered would give Democrats more flexibility when it comes to negotiating how to pay for a proposed $ 3.5 trillion of long-term investments in child care, education and other social programs.
Biden and Democratic lawmakers have repeatedly made clear that their plans will not raise taxes on those who earn less than $ 400,000 a year . That said, squabbles within the party itself threaten to slow down the advance of the White House tenant’s ambitious agenda.
Revolt among the Democrats
Just this week, Senator Joe Manchin (D-West Virginia) strongly reaffirmed his opposition to the size of the $ 3.5 trillion reconciliation package and, more surprisingly, advocated a “pause,” suggesting that it might not be in accordance with the aggressive schedule pursued by the party’s leadership in both the Upper House and the House of Representatives.
From Citi, its chief economist, Andrew Hollenhorst, estimates that a significant reconciliation bill is still likely, “but Manchin’s statements increase the risk around the size and timing of approval: all 50 votes are needed in the Senate to pass this legislation, “he recalls.
Precisely one of the reasons why the package of measures could be cut, perhaps to $ 1.5 trillion instead of $ 3.5 trillion, is that it would be closer to the amount of revenue that could be obtained by raising the rate of the 21% to 28% corporate tax, along with higher marginal rates for higher incomes and other likely changes to the tax code.
For her part, Treasury Secretary Janet Yellen encouraged legislators on Friday “to remember the historic opportunity to have a tax code that works for the middle class.” In this regard, he indicated that the US can impose a 21% tax on the foreign profits of US multinationals, which is still much less than what smaller companies that make their profits at home pay.
Yellen thus made reference to the global agreement within the framework of the OECD that according to her “will equalize the conditions of American companies and provide the necessary resources to invest in the priorities that will make the economy grow”. As he said on his Twitter account, this historic international tax reform will provide revenue to rebuild infrastructure, invest in education and increase the training of the workforce , “all of which contribute to the United States continuing to be the best place in the world to do business. business”.
A tight schedule
Last week, the Speaker of the House of Representatives, Nancy Pelosi (Democrat of California), reached an agreement that guaranteed a vote on the infrastructure bill (for about a trillion dollars) by next September 27 , in order to appease a group of moderate congressional Democrats.
Still, progressives made it clear that they would only support this vote if it was clear that an acceptably broad reconciliation package would be passed in addition to the bipartisan infrastructure plan. This has kept attention on the September 15 deadline for the committees to complete the details of the reconciliation package. Progressives in the House of Representatives have been quick to make public comments against Manchin’s defense of a smaller package and a longer process.
Aside from reconciliation, in the next 27 days Congress must address a possible government shutdown in late September and the bipartisan infrastructure bill, which includes $ 550 billion in additional spending. The House of Representatives could, in theory, proceed to the vote through a partisan reconciliation bill, but if Manchin does not commit to vote in favor of the bill in the Senate (where the 50 votes of the Democratic caucus) it will be difficult for Pelosi to reassure progressives in the House of Representatives that her priorities will become law.