What You Need to Know
- At issue are a handful of measures that would largely tax the owners of pass-through businesses.
Law firm partners, family business owners and other high-earning individuals who have stakes in companies are at the center of a last-minute lobbying battle over President Joe Biden’s slimmed-down economic plan.
Senate Majority Leader Chuck Schumer and Senator Joe Manchin, a West Virginia Democrat, are negotiating a tax increase proposal to fund the climate, health and deficit reduction plan. But the deal isn’t done and business groups are urging them to scale back the proposed levy hikes while progressives are urging Democrats to preserve the tax increases for wealthy individuals.
At issue are a handful of measures that would largely tax the owners of pass-through businesses, including limited partnerships and LLCs. These proposals, including a surtax on people with ultra-high incomes and an expansion of the existing 3.8% Medicare tax to pass-through profits, are the main measures in the House-passed economic agenda that would tax the rich.
Progressives fear that dropping these measures would mean that wealthy Americans would face little-to-no tax increases in a bill initially envisioned as a major tax hike on top earners.
The millionaires’ surcharge is “the only tax increase specifically designed to tax the very wealthy,” the Patriotic Millionaires, a progressive group of wealthy Americans, said in a letter to senators Wednesday. “It would be very unfortunate and a missed opportunity if Congress were to pass such important legislation and not specifically increase tax rates on billionaires and the ultrarich.”
The millionaires’ surtax, which would put a 5% surcharge on incomes over $10 million and an additional 3% levy on incomes over $25 million, is at risk of being cut from the package. Other tax hikes, such as raising the top tax bracket or increasing capital gains rates, were eliminated from the negotiations last year amid concerns from some vulnerable Democrats.