Democrats in both Houses of the Capitol are in the process of finalizing the details to finance the Biden Administration’s ambitious social plan, which has a billing of up to $ 3.5 trillion. A cost that legislators want to meet with the highest tax increase on this side of the Atlantic since 1968.
To date, some of the formulas proposed included raising the corporate tax from 21% to 28% or doubling the tax rate on capital gains, which, taking into account state control, could reach 48.8%. However, the more progressive Democrats pose another string of alternatives, such as overseeing share buybacks, carbon emissions and executive compensation, Bloomberg announced last week.
Options on the table
These measures go beyond the proposals suggested by the Joe Biden Administration, as they would include applying a special tax to share buybacks or treating them as taxable dividends. At the same time, it would be advocated to limit the deductions of the companies for the remuneration of their executives. Top managers could also face a special tax if their compensation exceeds that of an average worker in the company by a certain proportion.
The tax options considered would give Democrats more flexibility when it comes to negotiating how to pay for their long-term investments in childcare, 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, animosity within the Democratic camp itself threatens to slow the advance of the White House tenant’s ambitious agenda. Senator Joe Manchin (D-West Virginia) strongly reaffirmed his opposition to the size of the $ 3.5 trillion reconciliation package. dollars and advocated last week for a “pause”,
From Citi, its chief economist, Andrew Hollenhorst, estimates that the passage of a significant reconciliation bill is still likely, “but Manchin’s statements increase the risk around size and timing, as the 50 votes are needed. in the Senate to pass this legislation, “he recalls. This is precisely one of the reasons why the package of measures could be cut, perhaps up to 1.5 trillion dollars, a figure that could be financed with the increase in corporation tax.
Democratic squabbles block Biden’s economic agenda
In addition to budget reconciliation, in the next 27 days Congress must address a possible government shutdown as well as pass 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 in the Senate it will be difficult for the president of Congress, Nancy Pelosi, to reassure to progressives.