GDP Growth Slows, Democrats Unveil New Tax Proposals

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ICYMI: Democrats Propose Taxing Billionaires and a Corporate Minimum Tax Rate

In case you missed it, Congressional Democrats issued a series of new tax proposals to fund President Joe Biden's social spending agenda. Aimed at the country's billionaires and some of America's biggest companies, Democrats hope to raise hundreds of billions of dollars over the next decade in new tax revenue.

How Would It Work?

Senators Elizabeth Warren, D-MA, and Angus King, I-ME, and Senate Finance Committee Chair Ron Wyden, D-OR, have proposed a corporate minimum tax rate of 15% which would be applied to the roughly 200 businesses in the U.S. that report more than $1 billion in profits to shareholders. According to a 2017 study cited by the Senators, almost 40% of the largest corporations paid nothing in federal income taxes in at least one year between 2008 and 2015. In some instances, there were even companies that were eligible for a tax refund during that time.

In contrast, the average income tax rate for all Americans was 13.3% in 2018, according to the most recent data from the Tax Foundation. The proposal does include "flexibilities" for companies to claim business credits like those for research and development but aims to raise "hundreds of billions" in tax revenue over the next 10 years.

The "billionaires income tax" as proposed by Senator Wyden would apply to the roughly 700 billionaires in the U.S., and is estimated to generate "hundreds of billions" in tax revenue. According to the proposal, only taxpayers with more than $100 million in income, or more than $1 billion in assets for three consecutive years would be impacted by the proposed tax. As part of the proposed regulation, billionaires would be taxed on the gains and losses from assets, like stocks, each year—unrealized capital gains—and would also be subject to an interest rate charge on any taxes deferred on the sale of a non-tradable asset, like real estate.

What's the Impact on Biden's Build Back Better Plan?

The White House estimates the proposed corporate minimum tax rate will generate $325 billion, while a billionaire tax would raise an unspecified sum to the tune of "hundreds of billions of dollars." Biden's spending package originally carried a headline total of $3.5 trillion, a figure that has been trimmed considerably as Democrats hope to appease moderates within its party. While the President has claimed that taxes and other revenue generated from the Build Back Better plan would make the bill cost "zero," Democrats have scrambled to make the plan more appealing to those who have balked at the cost. It is still unclear if Democrats and some Republicans will get on board with the "social infrastructure bill" which includes extending tax credits to people in the U.S. with low income, and tax increases on high-earners, but does leave out Senator Wyden's proposed billionaire tax.

- Kristin

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