President Joe Biden’s plans to raise tax rates on corporate America and wealthy households have been thrown into doubt by resistance from Kyrsten Sinema, the Arizona senator, as a new roadblock emerged on the path to a deal with Congress on his sweeping economic agenda.
According to people familiar with the talks, senior Biden administration officials met with top Democrats on Capitol Hill on Wednesday to recast their planned measures to finance their $3.5tn spending package — in a late scramble after weeks of negotiations.
The White House and party leaders in Congress have been planning an increase in the corporate tax rate to at least 25 per cent from 21 per cent, along with increases in individual income and capital gains tax rates for the richest households.
But opposition from Sinema, a Democrat who has emerged as a leading thorn in Biden’s side on fiscal policy, has become increasingly entrenched in recent weeks, forcing the White House and senior Democrats to consider other ways to make up the lost revenue if tax rate rises fall short.
If the corporate income tax rate increase were to be scrapped, it would mark a big win for large US businesses and their lobbyists who had been pushing to preserve the current tax rates.
Brian Deese, the director of the National Economic Council, and Janet Yellen, the Treasury secretary, met with Ron Wyden and Richard Neal, the top tax-writing lawmakers in Congress, to hash out possible alternatives on Wednesday.
Among them are a surtax on share buybacks, which Wyden has previously advocated, as well as a minimum tax on book profits, which the White House has supported and would also increase the corporate tax burden. On the individual side, the officials and lawmakers discussed a possible tax on the wealth of billionaires, according to people familiar with the matter.
“The president is working to pass game-changing investments in economic growth that benefits the middle class, paid for by having the richest taxpayers and big corporations pay their fair share and without raising taxes on any American making less than $400,000,” Andrew Bates, a White House spokesperson, told the Financial Times.
“There is an expansive menu of options for how to finance the president’s plan to ensure our economy delivers for hardworking families, and none of them are off the table,” he added.
People familiar with the negotiations said that no final decisions had been made, with nothing ruled out, but that the planned individual income tax rate increase, from 37 per cent to 39.6 per cent for the highest earners, was more likely to survive than the corporate income tax rise.
Joe Manchin, the other conservative Democrat trying to limit Biden’s economic agenda, has also called for smaller tax increases than the White House, yet he does support raising the corporate income tax to 25 per cent and a rise in some individual tax rates on the wealthy.
Sinema’s office declined to comment.
The fate of international tax proposals, including a minimum levy of at least 15 per cent agreed as part of a multinational accord at the OECD, was unclear, but Yellen earlier this month said she was “confident” it would be included in any package.
Biden and the overwhelming majority of Democrats were hoping to approve up to $3.5tn of new investments over the next 10 years to reshape the US economy with stronger government support for childcare, healthcare, education and the fight against climate change. Faced with unanimous opposition from Republicans, and scepticism from a very small group of conservative internal dissidents including Sinema, they are discussing ways to scale back the spending to less than $2tn.
Individual Democratic lawmakers such as Sinema have exceptional leverage in the talks because of the party’s very flimsy Democratic majorities in both the House and the Senate. The White House and Democrats have been hoping to strike an intraparty compromise by the end of this month, ahead of Biden’s travels to the G20 summit in Rome and the COP26 climate conference in Glasgow, but it is unclear whether they will meet that goal.
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October 21, 2021 at 08:50AM
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Biden's corporate tax increase plans come under threat from Democratic senator - Financial Times
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