A tax on the profits of the nation’s wealthiest corporations was a key element of Massachusetts Sen. Elizabeth Warren’s presidential campaign. She wants it to become reality in the Democrats’ $3.5 trillion reconciliation package.
On Monday, Warren and Sen. Angus King, an independent from Maine who caucuses with the Democrats, announced in a press call they are planning to include a real corporate profits tax in the reconciliation bill, which would require companies to pay a 7% tax on earnings they report to investors above $100 million. This tax wouldn’t apply to the earnings that companies report to the Internal Revenue Service, which are typically diminished to lower tax liability.
“I believe the revenues should come from billionaires and giant corporations that have evaded paying their fair share for far too long,” Warren said during a press call.
“Our Real Corporate Profits Tax Act would create a fairer system and strengthen our economy by ensuring that highly profitable corporations stop getting away with cheating the system,” she added.
Amazon reported $21.3 billion in profits last year, and Microsoft reported $61.2 billion.
King emphasized during the call that “$100 million is the starting point,” meaning small businesses wouldn’t be impacted.
“All we’re saying is that large profitable corporations that are reporting these profits to their shareholders should pay some minimum amount,” King said. “7% is what we’re talking about. I see this as simple tax fairness.”
The two senators estimated the tax would bring in nearly $700 billion in revenue over 10 years.
The Senate is expected to pass the bipartisan $1 trillion infrastructure package this week, but given that it leaves out many care-economy measures, such as universal pre-K and free community college, Senate Democrats, led by Bernie Sanders, laid out a blueprint for a separate $3.5 trillion reconciliation bill on Monday to encompass everything that got left out of the infrastructure plan, including a tax hike on the wealthiest Americans.
King noted during the press call that this corporate profits tax would help pay for universal pre-K and free community college, among other things.
Along with a profits tax, Warren proposed an ultramillionare tax in March on the top 0.05% of American households – another core component of her presidential campaign. Her argument for a wealth tax was bolstered by a ProPublica report in June that detailed how the wealthiest Americans, including Amazon’s Jeff Bezos and Tesla’s Elon Musk, managed to pay little to nothing in federal taxes.
Given that Republican lawmakers have been in strict opposition toward raising taxes on the wealthy, including the profits tax in the reconciliation bill is the best shot for Democrats since it can be passed without any Republican votes.
“This is about basic fairness,” Warren said. “And if the big corporations are going to continue to exploit loopholes in the ways they have done, then we think there needs to be a backstop against that.”
Sen. Bernie Sanders on Monday said he’s pushing Democrat-only infrastructure package larger than $3.5 trillion, as Senate Democrats kicked off a frenzied legislative period.
“I’m going to fight to make that proposal as robust as it can be,” Sanders told reporters outside the White House after an afternoon meeting with President Joe Biden. He’s pushed for $6 trillion in new spending and shot down a $3.5 trillion price tag that has been floated.
The price tag was pitched by Sen. Mark Warner of Virginia, according to two people familiar with the talks. Both were granted anonymity because they weren’t authorized to speak about the negotiations.
Sanders also said the legislation was a way to show average Americans that the government was capable of improving their lives.
“We want to see a reconciliation bill which shows the working families of this country that government can and must work for them,” Sanders said, referring to the legislative pathway Democrats will use to approve a bill with only a simple majority, skirting Republicans.
He added that the package Democrats are drafting could be among the most transformative since the New Deal era.
“What we are trying to do is transformative,” he said. ‘The legislation that the president and I are supporting will go further to improve the lives of working people than any legislation since the 1930s.”
It comes as Sanders starts deploying a substantial amount of influence as chair of the Senate Budget Committee over the reconciliation process. The Vermont senator has a big role shaping the size and scope of Biden’s tax-and-spending plans, and his committee is tasked with writing instructions on federal spending and taxes to other Congressional committees.
Over the weekend, Sanders told The New York Times he’s pressing for a party-line infrastructure package topping $3 trillion that includes housing, climate, childcare, and paid leave among other new initiatives. That could set up a clash with moderate Senate Democrats like Warner and Joe Manchin of West Virginia who favor a slimmer party-line bill. Manchin has expressed support in the past for a $2 trillion party-line bill that’s fully paid for.
Given talks appear to be in their early stages, several Senate Democrats said they weren’t ready to back Sanders’ large price tag. They are racing to kick off the reconciliation process within the month, but a final bill wouldn’t be passed until sometime in the fall.
Sen. Ron Wyden of Oregon, chair of the Senate Finance Committee, deflected when asked if he could support a package of that size. The panel is in charge of drafting the tax components that generate revenue for eventual infrastructure legislation.
“My colleagues and I have been talking all through the break,” Wyden told Insider, referring to the two-week July 4 recess. “We’re going to do some more talking.”
Other Democrats also weren’t ready to throw their support behind the hefty price tag pitched by Sanders.
“Depends on what it’s spent for and how it’s paid for,” Sen. Jon Tester of Montana, a member of the bipartisan group that struck a $1 trillion bipartisan deal with Senate Republicans, told Insider.
Sen. Chris Coons of Delaware, a key Biden ally, demurred as well. “I’m very focused on getting to text on the infrastructure bill,’ he said. “What matters more than the price tag to me is the contents and the details.”
“To me, it’s much more important to try to determine what’s in the package than to start at a topline and work backwards,” Sen. Angus King of Maine, an independent who caucuses with Democrats, said in an interview. “I’d rather say these are the things the country needs and that’s the way I’m going to approach it.”
Democrats hold a 50-50 Senate that relies on a tie-breaking vote from Vice President Kamala Harris. Every Senate Democrat must be onboard the party-line bill or else the effort collapses.
As bipartisan infrastructure talks plod on, funneling money to beef up IRS enforcement looks like it’ll be sticking around.
Sen. Angus King, an independent of Maine who caucuses with the Democrats, told Insider on Tuesday that deciding what pay-fors make it into the final package is difficult – but suggested that funding for IRS enforcement will remain.
“I understand going after tax cheats is part of it,” King said. “There’s a lot of money we’re leaving on the table right now.”
The bipartisan Senate group of 10 – evenly divided between Republicans and Democrats – is working on a $1 trillion package. Sen. Rob Portman of Ohio, a prominent lawmaker in the group, told reporters Tuesday that money to bulk up the IRS’s ability to enforce tax laws would be included in the nascent framework.
The IRS officially estimates the “tax gap” coming in at $441 billion a year. But Charles Rettig, the agency’s commissioner, told Congress in April that the number could actually be over $1 trillion.
The bipartisan approach to IRS enforcement might not go that high.
“We have a CBO estimate that, if you put about $40 billion into bringing back the IRS workforce … that could result in $110 billion – which nets out to $63 billion,” Portman said on Tuesday. “It’s a relatively modest increase in IRS spending compared to what the Democrats proposed under Biden’s plan.”
The number of agents devoted to working on sophisticated tax evasion enforcement has fallen by 35% over the last decade, according to Treasury and the IRS budget has fallen by 20%, while audits fell by 42% from 2010 to 2017. According to a White House fact sheet, the audit rate for those making over $1 million a year declined by 80% from 2011 to 2018.
Biden wants to ramp up enforcement on the wealthiest Americans. A recent study from IRS researchers and academics found the top 1% of Americans fail to report about a quarter of their income. Income underreporting is nearly twice as high for the top 0.1%, which could account for billions unreported.
The role of IRS enforcement is coming into greater relief following a bombshell ProPublica report, which revealed just how little in proportional taxes some American billionaires pay. The tax mechanisms that those billionaires utilize are actually completely legal, but they’ve kickstarted talks of tax reform among Democrats.
Following the ProPublica report, five former treasury secretaries published an op-ed in The New York Times saying that, “in the ways outlined by President Biden’s recent proposal,” more enforcement could be pursued.
The five former treasury secretaries – who served under both Democratic and Republican presidents – write: “But on this issue, all should agree, including members of Congress of both parties: Giving the I.R.S. the tools it needs to improve compliance will raise significant revenue and create a fairer, more efficient system of tax administration.”
Although a federal minimum wage increase to $15 an hour didn’t make it into the stimulus bill, Senate Democrats are meeting today to find a way to get it done somehow, a Democratic source told HuffPost.
According to the source, Senate Majority Leader Chuck Schumer will meet with the progressive senators who led the push for the $15 minimum wage increase, including Bernie Sanders of Vermont, Patty Murray of Washington, and Ron Wyden of Oregon. But the meeting will also include all seven moderate Democrats who voted against the $15 minimum wage hike: Joe Manchin of West Virginia, Kyrsten Sinema of Arizona, Chris Coons of Delaware, Tom Carper of Delaware, Jeanne Shaheen of New Hampshire, Maggie Hassan of New Hampshire, and Jon Tester of Montana.
When the Senate parliamentarian voted against including a minimum wage increase in the stimulus bill, Sanders – who co-sponsored a bill to raise the wage to $15 an hour by 2025 – promised he wouldn’t give up on efforts to get the job done.
“But let me be very clear: If we fail in this legislation, I will be back,” Sanders told reporters on March 1. “We’re going to keep going and, if it takes 10 votes, we’re going to raise that minimum wage very shortly.”
And in a call with reporters on Friday, progressive lawmakers, including Rep. Ro Khanna of California, joined labor leaders and activists to strategize how they could pass a minimum wage increase through Congress, whether by reconciliation or attaching it to a must-pass bill.
“There needs to be a clear plan, a clear strategy,” Khanna told The Washington Post in an interview. “It’s not enough to just say, well, we’re committed to this, we want to get it done.”
Manchin has previously said that a $15 minimum wage increase is too high and advocated for an $11 per hour increase instead. However, Sanders has remained adamant on achieving a $15 per hour increase to lift Americans out of poverty.
“In my mind, the great economic crisis that we face today is half of our people are living paycheck to paycheck,” Sanders said on Twitter on March 5. “And many millions of workers are, frankly, working for starvation wages. Raising the minimum wage is what the American people want, and it’s what we have got to do.”
Eight Senate Democrats broke from the majority and voted on Friday against the $15 minimum wage hike proposed by Sen. Bernie Sanders.
The vote scrapped Sanders’ push for the provision to be added back into the stimulus package being negotiated in Congress, after Senate parliamentarian Elizabeth MacDonough ruled that it should be nixed.
MacDonough ruled that the minimum wage increase violates the “Byrd Rule,” which prohibits “extraneous” policies as part of a reconciliation bill or resolution.
“It is hard for me to understand how drilling for oil in the Arctic National Wildlife Refuge was compliant with the Byrd rule, but raising the minimum wage is not,” Sanders said.
President Joe Biden has also expressed support for gradually raising the minimum wage to $15 an hour.
The bill was abandoned in the Senate after eight Democrats voted against the proposal:
Sen. Joe Manchin of West Virginia
Manchin, a moderate Democrat who holds Byrd’s former Senate seat, had previously expressed disapproval of the minimum wage hike, standing with the Senate parliamentarian MacDonough.
“My only vote is to protect the Byrd Rule: Hell or high water,” the senator told CNN in February. “Everybody knows that. I’m fighting to defend the Byrd Rule. The President knows that.”
Sen. Kyrsten Sinema of Arizona
Sinema, another key moderate who had previously thrown cold water on the minimum wage hike, also voted against the proposal on Friday. To represent her “nay” vote, the Arizona senator dramatically voted with a “thumbs-down” to the Senate clerk, sparking backlash from progressive senators.
Despite her “thumbs-down” vote, Sinema said in a statement that she would be open to renegotiating a minimum wage increase “separate” from the relief package.
“Senators in both parties have shown support for raising the federal minimum wage, and the Senate should hold an open debate and amendment process on raising the minimum wage, separate from the COVID-focused reconciliation bill,” Sinema said in a statement.
Sen. Jon Tester of Montana
Tester voted against the proposal on Friday. Manchin said he and Tester hoped the spending in the stimulus package as a whole would be better “targeted” and “helping the people that need help the most.”
Sen. Jeanne Shaheen of New Hampshire
Shaheen’s office told Boston.com, the news site for the Boston Globe, in a statement that the senator from New Hampshire supports the minimum wage hike, but only with “safeguards” to protect small businesses and restaurants that have borne the economic brunt of the coronavirus pandemic to ensure they “don’t go under.”
“I also think we should work with some of those folks who are affected to help figure out how we can get them through an increase in the minimum wage,” Shaheen told WMUR9. “We have nursing homes in New Hampshire who are having difficulties employing people because of the wage scale.”
Sen. Maggie Hassan of New Hampshire
Another senator from New Hampshire, Hassan, rejected the minimum wage hike proposal. Like Shaheen, Hassan said she supports a separate bill to push the increase through Congress rather than bulking it with the stimulus package.
“Well so there’s isn’t going to be an increase in the minimum wage in this package,” Hassan said in an interview with WMUR9. “That being said, I think it’s really important that we all recognize that people who work 40 hours a week should be able to get by. They shouldn’t be living at or below the poverty level when they’re working hard.”
Sen. Angus King of Maine
King, an independent from Maine who typically caucuses with Democrats, also voted against Sanders’ proposal. He told The Wall Street Journal last week that, while he supports increasing the minimum wage to $15 an hour, he expressed concern that increase labor costs could prompt businesses to make lay off employees.
During the pandemic, “a lot of restaurants are just hanging on by the thread,” he said.
Sen. Tom Carper of Delaware
Two senators from Delaware, Sens. Carper and Coons, were surprising dissenters to the minimum wage hike, especially hailing from Biden’s home state where local Democrats have thrown their support behind such a policy.
Carper threw cold water on the proposal on Friday, citing a need to protect struggling businesses from the increased labor costs.
“I have backed a $15 minimum wage on the federal level for years,” Carper said in a statement to Delaware Online. “At a time when our economy is still slowly recovering, though, policymakers have a responsibility to be especially mindful of the fragile state of small businesses all across this country – many of which are fighting just to stay open during this unprecedented crisis.”
Sen. Chris Coons of Delaware
Like the other senators who dissented, Coons said he was concerned about how the minimum wage increase would impact small businesses.
“Every Democrat and many Republicans agree that the federal minimum wage of $7.25 is too low and has been for too long,” Coons said in a statement to Delaware Online. “It has to be raised. President Biden has called for us to raise it to $15 an hour. I will work with my colleagues on legislation to raise the minimum wage and index it annually.”