Taken together, the proposals would be the largest tax hike in decades and seem sufficient to cover most of what even progressive Democrats want to spend on their upcoming “reconciliation package”. The legislature wants to use the money to finance a dramatic expansion of the government’s safety net.
The proposals, which are due to be officially unveiled on Monday, would also mean a big step forward for the Democrats as they work out their plans for what is probably the most momentous piece of legislation in the Biden government.
Neal’s proposals, which are sure to be controversial, will be his chamber’s opening offers in negotiations with the Senate, which will discuss a menu of possible tax increases.
While lawmakers have worked behind the scenes to narrow their differences, it is clear that the two sides are on a collision course on several fronts. For example, Neal’s increase in a special tax on foreign company profits known as “GILTI” does not go as far as the chairman of the Finance Senate Ron Wyden (D-Ore.) Or the Treasury Department have suggested.
At the same time, Neal’s corporate tax rate of 26.5 percent is higher than the 25 percent preferred by Sen. Joe Manchin (DW.Va.), a major centrist. The current rate is 21 percent.
Neal, who late Friday unveiled a separate plan for more than $ 1 trillion in tax cuts and other benefits that the Democrats are also looking to include in their reconciliation package, plans to get both of these through his committee this week.
The Democrats are rushing to put their reconciliation package – which can be passed without a Republican vote – together by an internal September 15 deadline. The party leaders hope to see it out of the house by the end of this month.
A White House spokesman praised Neal’s proposals.
“This fulfills two key objectives that the president set at the beginning of this process – it won’t raise taxes on Americans who earn less than $ 400,000, and it will undo the core elements of the Trump tax giveaways for the rich and corporations who do nothing have done to our strengthen the economic health of the country, “said Andrew Bates in a statement.
“The President looks forward to continuing to work with Chairman Neal, the Senate Finance Committee and Chairman Wyden as we advance the Build Back Better agenda.”
Although Neal’s committee is tasked with figuring out how to fund the Democrats’ reconciliation plans, his plans have been a closely guarded secret.
While other Democratic leaders have enthusiastically welcomed tax hikes for the rich and big corporations, the Massachusetts Democrats have said little and prefer to consult with colleagues behind closed doors. The Democrats have weak influence in the Chamber and can only afford to lose three votes.
Though some observers questioned Neal’s desire to raise taxes, his plans are more ambitious than many expected, with more than 20 different proposals.
He also plans to reset the upper marginal tax rate to 39.6 percent, down from 37 percent to which Republicans lowered it under their 2017 Tax Cuts and Jobs Act. Neal would crack down on so-called carried interests – a form of compensation for private equity managers – and raise a special tax for high earners known as net investment income tax.
Neal would also curb corporate interest deductions; crack down on some type of land deal known as maintenance easement; and, among other things, raise tobacco taxes.
CORRECTION: Due to an editing error, the current marginal tax rate was incorrectly stated in an earlier version of this report.