WASHINGTON, July 28 (Reuters) – U.S. President Joe Biden’s campaign promise to raise taxes on businesses and the wealthy as part of a battle against stark income inequality in the United States received Wednesday an unexpected boost.
Early proposals to raise tax rates by Biden and his fellow Democrats hit a brick wall in Congress after Republicans – and some Democrats – opposed them. But a sudden reversal by West Virginia Democratic Sen. Joe Manchin, a swing vote in the divided Senate, has breathed new life into Biden’s tax agenda.
The amount that corporate America contributes to the tax revenue that funds roads and schools has plummeted since the 1940s.
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Biden has often said in office that businesses should pay a “fair share,” a contrast to the deference to private markets that began with Republicans’ election of former President Ronald Reagan in 1980, and fueled by rounds of cuts to ‘taxes and deregulation, on both sides.
The new compromise bill includes $430 billion in new energy spending, tax credits for electric vehicles and investments in health insurance. It’s more than paid for by raising minimum taxes on big business and enforcing existing tax laws, Manchin and Senate Majority Leader Chuck Schumer said in a statement.
Biden said during a speech Thursday that the deal “for the first time in a long time would begin to restore fairness to the tax code; it would begin to restore fairness by making America’s largest corporations pay their fair share without no new taxes on people.” earning less than $400,000 a year.”
The bill would impose a minimum tax of 15 percent on corporations with profits above $1 billion, raising $313 billion over a decade, they wrote. Companies could claim net operating losses and tax credits against 15%.
The U.S. corporate tax rate dropped to 21 percent from 35 percent after a 2017 tax cut pushed by then-President Donald Trump and his fellow Republicans, but many companies pay much less than that, and some of the largest pay no federal taxes, according to research groups. including the Institute of Fiscal and Economic Policy have found.
Biden proposed raising that rate to 28 percent last year as part of an infrastructure spending bill, but the tax component was removed from the bill.
The new Manchin-Schumer bill also aims to close the so-called carried interest gap, a longtime goal of Democrats.
The carried interest refers to a longstanding Wall Street tax break that allowed many private equity financiers and hedge funds to pay the lower capital gains tax rate on much of their income, rather than the highest rate of income tax paid by wage earners.
Eliminating the loophole would raise $14 billion, senators say.
Schumer said he expected the Senate to vote on legislation next week to “lower prescription drug prices, address the climate crisis with urgency and vigor, ensure that corporations and wealthiest individuals pay their fair share of taxes and reduce the deficit”.
The Manchin-Schumer measure is substantially smaller than the multibillion-dollar spending bill that Democrats had planned last year.
But it still represents a major advance for Biden’s policy agenda ahead of the Nov. 8 midterm elections that could determine whether Democrats retain control of Congress.
It came as Biden celebrated the Senate’s passage of a bill aimed at boosting the U.S. semiconductor industry, another key priority of his administration, and as he struggles with low approval ratings from jobs and reduced support from his own party after a series of conservative Supreme Court rulings. .
“This bill will reduce the deficit beyond the record $1.7 trillion in deficit reduction we’ve already achieved this year, which will also help fight inflation,” Biden said in a statement.
“And we’re going to pay for all of this by requiring big corporations to pay their fair share of taxes, with no tax increase for families making less than $400,000 a year,” he said.
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Reporting by Steve Holland; Editing by Heather Timmons and Mark Porter
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