In order to pay for plans for more social spending, Senate Democrats are proposing even more tax measures. This includes taxes on stock buybacks, carbon emissions, and executive pay.
Senate Democrats Want To Introduce More Taxes
Democrats floated one idea to charge excise taxes on stock buybacks. This means treating buybacks as taxable dividends. This is according to sources familiar with the Senate Finance Committee.
Democrats also proposed excise taxes for executive salaries that exceed a worker’s average pay by a predetermined ratio.
In addition, Senate Democrats also want to adjust how to tax capital gains. Instead of taxing gains during the period of sale, new rules will collect taxes upon acquisition of capital gains.
Finally, they want new limits for tax advantaged retirement accounts. These new proposals target the increase in the number of accounts that hide millions in wealth. This can also potentially generate hundreds of billions of dollars from the top 600 richest Americans.
How To Pay for Biden’s $3.5 Trillion Social Plans
The proposed tax measures give Democrats more options on how to pay for President Joe Biden’s $3.5 trillion social spending proposals. Biden wants to increase investments in child care, education and other social programs.
Biden and Democratic lawmakers repeatedly assured everybody else they won’t raise taxes for Americans earning less than $400,000 annually.
Other proposals to pay for the programs include a revisit on the corporate tax rate. Former President Donald Trump reduced the tiered tax rates between 15% to 39% to a flat 21%.
Now, Biden wants to change the tax rates again. This entails raising taxes on overseas income as well as increasing top tier rates to 39.6% as well as the capital gains rate.
Manchin Wants Senate Democrats To Pause The Proposals
However, Democrats couldn’t even get their acts together. Senator Joe Manchin (D-WV) criticized the $3.5 trillion budget of the proposed plan. He also suggested that Democrats pause on the deliberations, given current issues on inflation and debt.
Meanwhile, members of the House Ways and Means Committee are preparing their own version of tax measures to pay for the social program. For the measure to proceed, the House version will need to reconcile with the Senate version.
Senate Democrats say that taxes collected on corporate buybacks and dividends would raise $70 billion to $80 billion a year. An earlier paper published by law professors Daniel Hemel and Gregg Polsky agrees with the potential gains.
The proposed new taxes present “a potentially attractive add-on to future budget bills that strive for revenue neutrality or deficit reduction.”
Another measure getting consideration by Senate Democrats is increasing exemptions on capital gains taxes on appreciated assets. These are the assets held by wealthy individuals until death.
The proposal increases the exemption from $1 million per person to $5 million, as well as from $2 million to $10 million per couple.
The Senate Finance proposal also proposes to change exemptions for their property from taxes. From the $10 million exemption, the Senate Democrats now want to raise the amount to $25 million.
Biden’s proposal also wants to allow family-owned-and-operated small businesses to indefinitely defer paying the capital gains tax. They can pay the capital gains tax when they sell the business or they relinquish control.
At the same time, Senate Democrats want the Internal Revenue Service to tax carried interest for fund managers at regular tax rates. The IRS can crack down on trusts used by the wealthy to avoid gift and estate taxes.
Watch the CNBC Television video reporting that Senate Democrats look at possible tax changes to pay for spending package:
Do you agree with the tax proposals made by Senate Democrats to pay for their social programs? In addition, do you also support the increased spending on social programs?
Let us know what you think. Share your thoughts in the comments section below.
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