Biden vows to tax the wealthy, businesses revived with Manchin-led bill

The Chairman, U.S. Senator Joe Manchin (D-WV), attends a U.S. Senate Committee on Energy and Natural Resources hearing on Capitol Hill in Washington, U.S., July 19, 2022. REUTERS/Elizabeth Frantz/ File Photo

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WASHINGTON, July 28 (Reuters) – U.S. President Joe Biden’s campaign promise to raise taxes on businesses and the wealthy as part of a fight against gross income inequality in the United States has received a boost unexpected on Wednesday.

Early tax rate hike proposals from Biden and his fellow Democrats hit a brick wall in Congress after Republicans and some Democrats opposed them. But a sudden U-turn by Democratic West Virginia Sen. Joe Manchin, a split Senate swing vote, breathed new life into Biden’s tax agenda.

The amount that U.S. corporations contribute to tax revenue that funds roads and schools has dropped since the 1940s.

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Biden has often said in office that corporations should pay a “fair share” instead, a contrast to the deference to private markets begun by Republicans with the election of Ronald Reagan in 1980, and buoyed by a series of government cuts. taxes and deregulation, by both parties.

The new compromise bill includes $430 billion in new spending on energy, tax credits for electric vehicles and investments in health insurance. It more than pays off by raising minimum taxes for big business and enforcing existing tax laws, Manchin and Senate Majority Leader Chuck Schumer said in a statement.

The bill would impose a minimum tax of 15% on corporations with profits over $1 billion, raking in $313 billion over a decade, they wrote. Companies could claim net operating losses and tax credits against the 15%.

The US corporate tax rate fell from 35% to 21% after a 2017 tax cut pushed by then-President Donald Trump and his fellow Republicans, but many companies are paying far less than that, and some of the largest pay no federal taxes, research groups including the Institute for Taxation and Economic Policy have found.

Biden proposed raising that rate to 28% 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 vested interest loophole, a longtime goal of Democrats.

Deferred interest refers to a long-standing tax break on Wall Street that allows many private equity and hedge fund financiers to pay the lower capital gains tax rate on a large portion of their income. , instead of the higher income tax rate paid by employees.

Closing the loophole would net $14 billion, according to the senators.

Schumer said he expects the Senate to vote on the legislation next week, to “lower prescription drug prices, tackle the climate crisis with urgency and vigour, ensure that businesses and individuals the wealthiest pay their fair share of taxes and reduce the deficit”.

The Manchin-Schumer measure is significantly lower than the multi-trillion-dollar spending bill Democrats considered last year.

But it still represents a major step forward for Biden’s political agenda ahead of the Nov. 8 midterm elections that could determine whether Democrats retain control of Congress.

It came just as Biden was celebrating the Senate’s passage of a bill to boost the U.S. semiconductor industry, another key priority of his administration, and as he grapples with low job approval ratings and 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’ll pay for it all by requiring big business to pay their fair share of taxes, with no tax increases for families earning less than $400,000 a year,” he said.

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Reporting by Steve Holland; Editing by Heather Timmons

Our standards: The Thomson Reuters Trust Principles.

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