Senate Minority Leader Chuck Schumer (D-NY) speaks during a press conference on the coronavirus outbreak at the U.S. Capitol on March 11, 2020 in Washington, DC. Schumer and other members of the Democratic Caucus urged companies and employers to offer all employees paid sick leave in accordance with recommended health practices. Also pictured (LR) are Sen. Sherrod Brown (D-OH), Sen. Ben Cardin (D-MD), Sen. Ron Wyden (D-OR), Sen. Patty Murray (D-WA), Sen. Patrick Leahy (D-VT) and Senator Mark Warner (D-VA).
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Democrats in Congress are considering a series of new taxes to pay their $ 3.5 trillion draft budget, which targets large corporations and the country’s largest corporations to buy back shares.
On a discussion list of several new and expanded potential taxes is a proposal to impose an excise tax on public companies that buy back a “significant” amount of stock.
The list compiled by CNBC also includes a tax on companies whose CEO salaries exceed a ratio to be determined by the average employee of the company.
A discussion list is a draft of ideas that lawmakers put together before formally presenting them to the House or Senate. The representatives often hand out a list to determine which and how many members of the caucus support aspects of the plan. Therefore, important details such as the threshold above which certain taxes would be incurred and the amount of the payment have not yet been clarified.
The Democrats’ plan also includes taxes related to carbon emissions, which would likely be rejected by President Joe Biden and other moderate Democrats.
The proposed carbon taxes include a per tonne tax on the carbon dioxide content of leading fossil fuel manufacturers in production, which starts at $ 15 and escalates over time. Another suggests a per tonne tax on CO2 emissions levied by large industrial emitters such as steel and cement manufacturers. A third offers a simple per barrel tax on crude oil.
A related plan would remove significant fossil fuel tax subsidies, including tax credits and expedited tax deductions for mining, preferential treatment of foreign income, and the ability to evade corporate tax for pipeline companies.
But the supposed taxes are not exclusive to companies.
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Democrats point out that the current maximum tax rate of 37% will expire by the end of 2025 when it returns to its previous 39.6%. Her plan would speed up that schedule and restore the 39.6% in 2022.
The plan also aims to remove the long-criticized loophole in carried interest by requiring fund managers to pay normal rate taxes annually and be subject to self-employment tax.
Currently, managers often receive around 20% of profits accrued over a certain annual return, which can make up the bulk of a person’s income if their market bets result in significant profits. But that 20% commission is taxed at the 20% capital gains rate – the Democrats want that income, realized or not, to be taxed at the normal income tax rate every year.
The litany of tax ideas comes as Democrats look for ways to fund major spending initiatives they promised during the 2020 election cycle.
The Biden administration, Senate Majority Leader Chuck Schumer, DN.Y., and House Speaker Nancy Pelosi, D-California, are seeking over $ 4 trillion in incentives next month. The country’s top Democrats want a bipartisan $ 1 trillion infrastructure plan and a budget adjustment of $ 3.5 trillion to address issues like climate change and poverty.
The Democrats also see taxation as a way to tackle income inequality and reaffirmed their commitment to revitalizing the IRS and closing loopholes for businesses.
The revenue stream could also be an attempt to appease Conservative Democrat Senator Joe Manchin, who Thursday called on party leaders to “pause” their deliberations on the $ 3.5 trillion bill.
“For my part, I will not support $ 3.5 trillion or even close to that amount of additional spending without clarifying why Congress is ignoring the grave effects of inflation and debt on existing government programs,” wrote Manchin on Wall Street Journal op-ed.
– CNBC’s Ylan Mui contributed to this report.
