US President Joe Biden’s plans to spend nearly $5 trillion to change the world’s largest economy advanced in the House of Representatives on Tuesday, after Democratic leaders reached an agreement with centrist lawmakers to end a dispute threatening the bills.
Biden and his Democratic allies controlling the chamber are pushing for passage of both a $1.2 trillion infrastructure overhaul and a bill costing $3.5 trillion over 10 years that would pay for improvements to education, health care and climate change resiliency.
The dispute erupted when centrist Democrats in the House said the infrastructure bill, which the Senate already approved, must be voted on first.
The passing of this resolution has now teed off the following proposals:
Trillions in new tax increases on working families and small businesses. This budget resolution is the first step toward the Biden plan to raise taxes by $3 trillion over the next decade. Some of these tax increases include:
- Increasing the corporate tax rate from 21 percent to 28 percent, which will be passed along to working families in the form of higher prices, fewer jobs, and lower wages. This will give the U.S. a combined state-federal rate of 32 percent, higher than our foreign competitors including China, which has a 25 percent corporate tax rate.
- At least 2 million small businesses will get hit by Biden’s tax hikes. This includes over 1.4 million small businesses organized as c-corporations, family-owned farms impacted by the repeal of step-up in basis, and pass-through organizations which would be hit by the increase of the top marginal income tax to 39.6 percent.
- Raising the corporate income tax rate will hit Americans with higher utility bills as the country tries to recover from the pandemic. Customers directly bear the cost of corporate income taxes imposed on utility companies. Investor-owned electric, gas, and water companies must get their billing rates approved by the respective state utility commissions. Therefore, if Democrats raise the corporate tax rate, they will have voted to raise utility bills. [Americans for Tax Reform has compiled 300 examples of utilities passing tax savings along to customers.]
- Doubling the capital gains tax to 43.4 percent, a rate more than double China’s capital gains tax.
- Taking away step-up in basis and imposing a second death tax by taxing unrealized capital gains at death. This will disproportionately fall on family-owned businesses. Taking away step-up in basis has already been tried and failed. In 1976, Congress eliminated stepped-up basis, but it was so complicated and unworkable that it was restored in 1980.
- Imposing a 15 percent minimum tax on “book income” that will disallow the use of important deductions and credits that help promote job creation and economic growth.
- Increasing the top income tax rate to 39.6%, a tax increase that will fall on small businesses. As noted in a recent Senate Finance Committee report, “… in 2016, only 42 percent of net business income in the United States was earned by corporations, down from 78.3 percent in 1980.”
- New taxes on American energy including a tax on manufacturers based on their methane production and a carbon border tax. These tax increases will be passed along to families and businesses in the form of higher prices.
- Creating a 21 percent global minimum tax, higher than the 15 percent global minimum tax the Biden admin is pushing other countries to enact. Because existing law denies foreign tax credits, this could see businesses pay a top rate of 26.25 percent.
- Repealing the deduction for foreign-derived intangible income, a tax cut that encourages businesses to house their intellectual property in the United States.
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