What You Need to Know
- Senate Democrats are discussing a wider range of tax proposals than President Joe Biden has proposed.
- Another idea: Tax billionaires on unrealized capital gains.
- The Senate Finance Committee is also said to be considering a crackdown on some trusts that wealthy families use to avoid estate taxes.
Senate Democrats are discussing a wider range of tax proposals than President Joe Biden has proposed, including levies on stock buybacks, carbon emissions and executive compensation, as part of a package of measures to help fund a ramping up in social spending.
One idea is applying an excise tax on stock buybacks or treating them as taxable dividends to shareholders, according to two people familiar with Senate Finance Committee discussions. Corporate deductions for executive compensation could also be limited, and companies could face an excise tax if their chief executive officer’s pay exceeds that of an average company worker by a certain ratio, the people said.
Billionaires, meanwhile, could potentially face new “mark to market” rules requiring them to pay taxes on unrealized capital gains, potentially raising hundreds of billions of dollars from about 600 of the richest Americans. And new limits are being considered for the size of tax-advantaged retirement accounts, targeting an increase in the number of accounts shielding millions in wealth.
The expanded menu of tax options would give Democrats more flexibility as they undertake thorny negotiations among themselves over how to pay for $3.5 trillion of proposed long-term investments in child care, education and other social programs. Biden and Democratic lawmakers have repeatedly said that they won’t raise taxes on those making less than $400,000 a year.
Assorted other proposals are in the mix and have previously been proposed by Biden or by Senate Democrats, including raising the 21% corporate rate, increasing taxes on overseas company income and raising the top individual income tax rate to 39.6% as well as the capital gains rate for high-income investors.
It’s not clear which parts could get enacted, however, given the views of Sen. Joe Manchin of West Virginia — a pivotal Democrat who this week blasted the $3.5 trillion size of the legislation and called for a pause in its consideration given concerns about inflation and debt.
The House Ways and Means Committee, meantime, is assembling its own version of tax measures. The two chambers would need to reconcile any differences for legislation to make it into law.
Treating corporate buybacks and dividends similarly for tax purposes would raise $70 billion to $80 billion a year, “making it a potentially attractive add-on to future budget bills that strive for revenue neutrality or deficit reduction,” law professors Daniel Hemel and Gregg Polsky wrote in a paper earlier this year.
Other measures being considered by Senate Finance Committee Democrats would increase exemptions to Biden’s proposal to impose capital gains taxes on appreciated assets held by wealthy individuals until death.