Sen. Sanders spending bill would increase taxes, inflation: Sen. Portman
Sen. Rob Portman, R-Ohio, argues a $6 trillion spending package would ‘really hurt’ the economy and working families across America.
President Biden is facing pushback from some House Democrats over his plan to substantially raise taxes on investment gains – a key part of funding his sweeping, multitrillion-dollar economic agenda.
Under Biden's American Families Plan – which would serve as the basis for Democrats' $3.5 trillion reconciliation bill – the top capital gains tax would climb to 39.6% from 20% for Americans earning more than $1 million, or roughly 500,000 households. The president plans to keep an existing Medicare surcharge in place, bringing federal tax rates as high as 43.4% for some Americans.
Taxes on long-term capital gains – generally classified as an asset that's held for more than one year – currently range from 0% to 20%, depending on a person's income. Wealthier investors are also subject to an additional 3.8% tax on long- and short-term capital gains that's used to fund ObamaCare. Short-term capital gains on assets sold within a year are typically taxed as ordinary income.
BIDEN'S PLANNED CAPITALS GAINS TAX HIKE COULD SLASH US REVENUE BY $33B
While most Democrats on the tax-writing House Ways and Means Committee support Biden's plan, close to one-third of the members are pushing for a lower rate on investments – potentially around 28%, according to Bloomberg News, citing people familiar with the matter.
Some lawmakers have also raised concerns about Biden's proposal to end a tax loophole known as the "step-up in basis," which allows heirs to inherit assets at its current holding value. Beneficiaries can sell those assets and pay capital gains based only on the time they receive the asset and the time they sold it, allowing them to minimize the tax bite.
But some lawmakers have warned that eliminating that provision of the tax code could ultimately hurt family farms and small businesses. The Biden administration has indicated that it plans to exempt farmers from some of the president's proposed tax changes in order to ensure that family-owed farms aren't forced into bankruptcy.
WHAT BIDEN'S CAPITAL GAINS TAX PROPOSAL COULD MEAN FOR YOUR WALLET
"Our reforms are designed with protections so that family-owned businesses and farms will not have to pay income taxes when given to heirs who continue to run the business," a White House spokesperson told FOX Business. "These protections will encourage family farms to stay in the family."
Still, the pushback from some Democrats over Biden's plans to raise taxes on investments and generational wealth could imperil the broader tax and social spending bill that the House committees are crafting this week. With extremely slim majorities in the House and Senate, Democrats need to vote in near lockstep in order to pass the legislation and overcome the expected Republican opposition.
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If Democrats scale back the size of the tax hikes, it could also leave them with less money to toward funding a massive expansion of the social safety net, including establishing universal pre-kindergarten, free community college, paid family leave and tax credits for low- and middle-income households.
Congress estimates that stepping up the basis of inherited assets costs the government about $43 billion a year. Eliminating the practice – coupled with raising the top statutory rate on capital gains from 20% to 39.6% – would generate an estimated $113 billion in new revenue over the next decade, according to recent findings from the Penn Wharton Budget Model, a nonpartisan group at the University of Pennsylvania's Wharton School.
The House could make its version of the tax portion of the bill public as early as next week.
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