Move aside, hot vax summer. Biden is bringing hot tax summer to the US.

Felipe Castro holds a sign advertising a tax-preparation office for people who still need help completing their taxes before the IRS deadline on April 14, 2010, in Miami.
Felipe Castro holds a sign advertising a tax-preparation office for people who still need help completing their taxes before the IRS deadline on April 14, 2010, in Miami.

  • This summer everyone in Washington will be talking about taxes, while parents will get a tax credit.
  • Biden wants to raise taxes to pay for a huge infrastructure bill that may be ready in July.
  • Meanwhile, millions of American parents will start getting checks from Biden’s expanded tax credit.
  • See more stories on Insider’s business page.

You’ve probably heard that it’s hot vax summer. Vaccination rates have climbed, mask mandates are lifting, and Americans are slowly starting to venture into the first semblance of the After Times. In anticipation of the US fully reopening, cooped-up Americans are buying new going-out clothes and getting ready for the intimacy they put on pause. Even brands are getting thirsty.

But another thing will be heating up this summer: tax policy. President Joe Biden has already shepherded a law through Congress that will change the tax code (for a few years) to send monthly checks to American families, and he’s hard at work on another that would raise taxes on corporations and families earning more than $400,000 a year.

The tax-credit checks will start going out in July, just when Speaker Nancy Pelosi has vowed to deliver Biden his infrastructure bill in the House.

The stakes are scorchingly high, because despite the reopening economy, the pandemic exacerbated preexisting inequalities, while millions of Americans remain unemployed and April’s surprisingly dismal jobs report showed an uneven labor-force recovery.

Enter the hot tax summer.

Biden wants to raise taxes on the wealthy and corporations to offset massive infrastructure spending

Some of the country’s highest earners will see tax increases if Biden gets his way. He’s proposed increasing the income tax rate to 39.6% for Americans earning over $400,000, and raising the capital gains rate to the same level.

That increase – targeted only at Americans earning $1 million or more – would hit wealthy investors who get the bulk of their income from assets like stocks. The capital gains rate is generally lower than the rate that income is taxed at. As Insider’s Liz Knueven reported, the change would affect just about 0.4% of American taxpayers.

Overall, only the top 1% of filers would be affected and have to pay $100,000 more a year in taxes.

“This is about making the average multimillionaire pay just a fair share,” Biden said in a fiery speech defending the increases. “It’s not going to affect their standard of living a little bit.”

Significantly, Biden also wants to close up some tax-code loopholes and to ramp up tax enforcement on the wealthiest American, who have been found to hide billions in income from the IRS. The IRS estimates that there’s a tax gap of $441 billion a year. But Charles Rettig, the agency’s commissioner, has told Congress that the number could actually be over $1 trillion.

The gap between taxes owed and taxes paid could grow only if left untouched, according to the Department of Treasury. Treasury estimates that Biden’s proposed $80 billion investment in the IRS could bring in an additional $700 billion over 10 years. That would still leave hundreds of billions in taxes going uncollected each year, as Insider’s Ayelet Sheffey reported.

Biden’s also proposed raising taxes on corporations, aiming to bring the corporate tax rate up to 28% from 21%, though it will likely end up closer to the international average rate of 25%.

Meanwhile, an expanded tax credit will start putting checks into families’ pockets

Regardless of what happens with the infrastructure negotiations, many Americans will start feeling the effects of new Biden tax policies this summer.

Beginning July 15, families will start receiving monthly checks of up $300 from the IRS. Every 15th of the month for the next year – unless it falls on a holiday – checks will come. Those checks come from the expansion of the child tax credit, which was revamped under Biden’s $1.9 trillion American Rescue Plan.

One of Biden’s proposals in the American Families Plan is extending those checks through 2025 (many Democrats want to make them permanent). The checks are, as Insider’s Aria Bendix reported, essentially akin to basic income, and most children in the United States are set to benefit from then.

Low-earning Americans will also see an income boost from the expanded Earned Income Tax Credit, which subsidizes wages. According to an analysis from the left-leaning Center on Budget Policy and Priorities, over 17 million adults will now be eligible for an expanded subsidy.

Biden’s proposed tax increases are already seeing pushback. Some businesses have come out against the corporate increase, and there’s likely to be a lot of back and forth over what can and cannot be included in Biden’s two-pronged infrastructure package.

As Politico reported, lobbyists and executives think that they’ll be able to kill off many of the tax hikes that the president is putting forward. That could put some of Biden’s promises in jeopardy.

So while it’s not clear what, exactly, taxes will look like on the other side of all of this, they’re already in the spotlight – and they’ll probably only become a hotter topic as the temperature goes up this summer.

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‘Champions League of tax avoidance:’ Uber used 50 Dutch shell companies to dodge taxes on nearly $6 billion in revenue, report says

GettyImages 1176816141 (1) NEW YORK, NEW YORK - SEPTEMBER 24: Dara Khosrowshahi, CEO, UBER, speaks onstage during the 2019 Concordia Annual Summit - Day 2 at Grand Hyatt New York on September 24, 2019 in New York City. (Photo by Riccardo Savi/Getty Images for Concordia Summit)
Uber CEO Dara Khosrowshahi.

Uber has been using a complex tax shelter involving around 50 Dutch shell companies to reduce its global tax bill, according to recent research from the Center for International Corporate Tax Accountability and Research.

In 2019, Uber claimed $4.5 billion in global operating losses (excluding the US and China) for tax purposes – in reality, it brought in $5.8 billion in operating revenue, according to CICTAR, an Australia-based research group.

Uber had previously disclosed details about its Dutch tax haven in 2019, when it moved its intellectual property from Bermuda to the Netherlands, but CICTAR’s research sheds more light on how the company has structured its network of shell companies.

“This is the Champions League of tax avoidance,” CICTAR principal analyst Jason Ward told Dutch news magazine De Groene Amsterdammer.

Uber did not immediately respond to a request for comment on this story.

Uber transfered its intellectual property through a $16 billion “loan” from one of its subsidiaries in Singapore that in turn owns one of Uber’s Dutch shell companies, a manuever that grants the company a $1 billion tax break every year for the next 20 years, the researchers found.

“Uber has supercharged their tax avoidance approach,” Ward told Insider, using an intellectual property tax break “to prevent future tax bills, turning it into a much more useful, viable tax structure in the Netherlands.”

CICTAR also found several of Uber’s Dutch subsidiaries hadn’t submitted mandatory financial reports, and in India, Uber paid less than a third of the 6% tax the country imposes on multinational companies, according to the report.

“India is in desperate need of public revenue” to help it combat COVID-19, yet companies like Uber are able to avoid cointributing to that effort through tax avoidance schemes, Ward told Insider.

In Australia, CICTAR found that Uber was underpaying its tax bill by $30.5 million (AUD$39 million), according to Groene Amsterdammer.

Uber’s sophisticated efforts to achieve little or no tax burden on multibillion-dollar global revenues highlights a long-standing challenge governments face in enforcing tax compliance among wealthy corporations and individuals across borders.

In response, some lawmakers around the world, including the US President Joe Biden, have lobbied for a global minimum tax and other measures to reduce tax avoidance, which the Tax Justice Network estimates costs governments $427 billion annually.

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Biden launches a fiery defense of his tax hikes: ‘This is about making the average multimillionaire pay just a fair share’

Biden
President Joe Biden.

  • In a Wednesday address, President Joe Biden gave an impassioned defense of his proposed tax hikes.
  • Biden wants to hike taxes on corporations and Americans making over $400,000 a year.
  • He said the rates he’s proposing have historical precedent, and he wants to offset spending.
  • See more stories on Insider’s business page.

While answering questions after a Wednesday address on the impact of the American Rescue Plan, President Joe Biden doubled down on his tax proposals and the need for wealthier Americans and corporations to pay their fair share – and took aim at prior Republican tax cuts.

“My Republican friends had no problem voting to pass a tax proposal – it expires in 2025 – that costs $2 trillion,” Biden said, adding that none of that was paid for. In fact, he said, it “gave the overwhelming percentage of those tax breaks to people who didn’t need it. The top one tenth of 1% didn’t need it.”

As for the argument Republicans gave in 2017, that it would generate a “great economic surge and growth,” Biden said “everyone from the Heritage Foundation on has pointed out it hadn’t done that.”

Then he turned to his plans to hike taxes.

“The biggest 35 or 30 corporations didn’t pay a single solitary penny last year, and they’re Fortune 500 companies,” Biden said. “They made $400 billion. They paid no taxes. How can that make any sense?”

Biden said sometime in the 2000s – he’d have his staff supply the exact date – the average CEO of a Fortune 500 company made about 36 times what the average employee of that corporation made.

“It’s over 450 times as much now. As my mother would say, who died and left them boss?” he said before raising his voice while questioning how it can benefit the economy to have CEOs make so much more than workers. “No, seriously, what rationale, tell me what benefit flows from that?”

“We’re not going to deprive” any executive “of their second or third home” or traveling privately by jet, he said.

“It’s not going to affect your standard of living at all. Not a little tiny bit,” Biden said, raising his voice, “while I can affect the standard of living of people I grew up with.”

Biden has proposed a slew of tax measures to offset the proposed spending in his two-pronged infrastructure package. Those include raising the income tax rate for the wealthiest Americans to 39.6%, bringing up the capital gains rate to the same level, and increasing the corporate tax rate from 21% to 28%. The corporate tax rate was one measure that was slashed under Trump’s tax package, falling from 35% to 21%.

Biden said he was open to compromising on the corporate tax rate – some Democrats have floated an increase to 25%, instead of 28% – but said he still wants to offset spending.

“I’m willing to compromise, but I’m not willing to not pay for what we’re talking about,” he said.

Inequality expert Sarah Anderson has testified in front of the Senate Budget Committee that the yearly gap between CEO pay and the pay of average workers is about 350 to 1.

Overall, the tax burden of Biden’s proposal would fall squarely on the top 1% of American tax filers, who would pay an average additional $100,000 per year. Biden addressed his proposal to raise the income tax rate to 39.6% for Americans making over $400,000, which he noted was a return to the Bush-era level.

“Just raise it back to what it was before. It raises enough money from that savings to put every single person in community college who wants to go,” he said. On that topic, he posed a question: “What’s going to grow America more?” The options, he said, are “the super wealthy having to pay 3.9% less tax” or an entire generation “of Americans having associate degrees.”

In closing, Biden said: “This is about making the average multimillionaire pay just a fair share. It’s not going to affect their standard of living” – pausing to whisper – “a little bit.”

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Under Biden’s plan, the top 1% of Americans would pay an extra $100,000 in taxes every year

biden amtrak
President Joe Biden and First Lady Jill Biden.

  • Biden wants to increase taxes on the highest-earning Americans to offset his spending plans.
  • His proposed increases would basically only impact the top of 1% of Americans, according to a report.
  • Biden’s tax proposals aren’t final, and his proposed capital gains increase may not go up that much.
  • See more stories on Insider’s business page.

Under President Joe Biden’s proposed tax increases, the top 1% of Americans could soon see their tax bills grow by about $100,000 per year.

A new report from the Institute on Taxation and Economic Policy (ITEP) finds that only the highest-earning Americans would see their taxes change if President Biden’s proposed increases to the income tax rate and capital gains rate pass. That change is concentrated amongst the top 1%, defined as those with an income over $681,600 (their average income is $2,167,700). The bottom 99% of taxpayers would see a 0% tax change, it said.

On average, the highest earners would see an increase of $104,130 in taxes, coming in at around 4.8% of their income. For those making between $276,200 to $681,600 – an average income of $404,100 – the average tax increase would be $20 a year.

Some states will be hit harder than others by tax increases

In a few states, a larger share of the population would feel the impact of proposed tax hikes. The report highlights that in five states – and the District of Columbia – a more than 1% share of the population would feel a hit.

Those are New Jersey, Massachusetts, Connecticut, California, and New York. In Massachusetts and New Jersey, 1.2% of the population would be affected by tax hikes. The wealthiest New York City residents will soon have the highest tax rate in the country regardless, per Insider’s Hillary Hoffower.

Biden’s proposals target the wealthy, but they’re not final

Biden’s latest tax proposals explicitly target the highest-earning Americans to offset the costs of multibillion-dollar investments in childcare, education, and paid leave. He’s also proposed raising the corporate tax rate from 21% to 28% to offset investments in infrastructure like roads and bridges.

Beyond increases, the IRS could also get about $80 billion in funding to ramp up enforcement on the wealthiest taxpayers, as Biden is proposing. A recent study by IRS researchers and academics found that the top 1% of Americans may be hiding billions from the IRS; Biden’s increased IRS funding could raise $700 billion over a decade, which would still leave the wealthy hiding hundreds of billions.

Of course, the package still has a long way to go before becoming law. A Morgan Stanley research note looked at Biden’s proposals versus what they predict as possible, and said the corporate tax rate and rate on capital gains will ultimately come in lower. However, the income tax rate increase and IRS enforcement will likely be as Biden proposes.

“Look, I’m not out to punish anyone. But I will not add to the tax burden of the middle class of this country,” Biden said in a Wednesday speech to the joint session of Congress.

He added: “When you hear someone say that they don’t want to raise taxes on the wealthiest 1% and on corporate America – ask them: whose taxes are you going to raise instead, and whose are you going to cut?”

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Biden won’t get all his tax increases through Congress. Here’s what Morgan Stanley thinks is possible.

joe jill biden
President Joe Biden and First Lady Jill Biden.

  • President Joe Biden wants to pay for his infrastructure proposals with tax increases.
  • Morgan Stanley strategists predict taxes will go up, but not as much as Biden’s proposing.
  • Still, it said Americans earning over $400,000 should expect to see their income tax rate increase.
  • See more stories on Insider’s business page.

President Joe Biden wants to increase taxes on some of the country’s highest earners to pay for affordable childcare, paid family leave, and free community college.

But how much will taxes actually go up? Morgan Stanley thinks Biden will only get some of what he’s asking for.

The investment bank cited comments from moderate Democratic Sen. Joe Manchin of West Virginia in predicting that a 25% corporate tax rate – not 28%, as Biden proposed – is possible. And while the income rate increasing to 39.6% for those earning over $400,000 remains possible, it said, an increase to the capital gains rate would be 30% or below, not the 39.6% currently proposed.

Manchin has signaled he wants a corporate tax rate closer to 25%, while Axios reports that some Senate Democrats are also currently resistant to potential tax hikes.

The bank also said that extending a 3.8% Obamacare tax to high earners is likely possible, but eliminating the step-up basis, which allows valuable assets to be passed along without taxes on any of its gains, may not be.

Screen Shot 2021 04 29 at 9.28.45 AM
Chart via Morgan Stanley.

Increased funding for ramped-up IRS enforcement – which would target the wealthiest Americans, and ensure they’re paying taxes owed – is possible, according to Morgan Stanley. That measure alone could bring in an additional $700 billion over the next decade, according to the Department of Treasury. But, as Insider’s Ayelet Sheffey reported, that boost in funding would likely mean the wealthiest would still be hiding hundreds of billions every year.

Since neither eventual bill is likely to garner GOP support, the bank said a package is likely headed for party-line reconciliation – and require some negotiation.

Still, Morgan Stanley’s base case sees Congress passing about $4 trillion in spending, whether it’s in one package or two, essentially the total that the White House wants.

“Look, I’m not out to punish anyone. But I will not add to the tax burden of the middle class of this country,” Biden said on Wednesday evening in his first joint address to Congress. “They’re already paying enough. What I’ve proposed is fair. It’s fiscally responsible.”

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American corporations are paying their fair share – to international tax havens

uncle sam taxes
  • President Joe Biden wants to increase the corporate tax rate, and the US is working on a global minimum tax.
  • Right now, US multinational companies are reporting the majority of their foreign profits in tax havens.
  • A global minimum tax would make taxes around the world more uniform for those companies.
  • See more stories on Insider’s business page.

When asked if corporations pay their fair share in federal taxes, two-thirds of respondents in a 2018 Gallup poll said they pay too little. In fact, Gallup found “the public consistently thinks that ‘upper-income people’ and corporations do not pay their fair share in federal taxes.”

In recent months, one of the people calling out corporate taxes paid – or lack thereof – has been President Joe Biden.

“I’m not trying to punish anybody, but damn it, maybe it’s because I come from a middle-class neighborhood, I’m sick and tired of ordinary people being fleeced,” Biden said in a recent speech. He’s also taken aim at 55 multinational companies that paid no income tax last year, citing a report from the left-leaning Institute on Taxation and Economic Policy.

As president, he’s trying to do something about it, proposing a suite of tax changes as part of his infrastructure package under which corporations would see their taxes climb from 21% to 28%, although he may well compromise at 25%.

Also, Treasury Secretary Janet Yellen has been calling for a global minimum corporate tax rate, and is working with the G20 on it. Essentially, this would be a nonbinding rate for multinational companies – meaning that corporations would be disincentivized from leaving one country for another with more favorable tax rates.

The truth is multinationals are still paying taxes, but they’re increasingly paying into international tax havens such as Bermuda and Singapore.

“According to the US Treasury, of the top 10 foreign countries in which US multinationals report profits, seven are tax havens,” the note said. “These are relatively small economies: Bermuda, the Cayman Islands, Ireland, Luxembourg, the Netherlands, Singapore and Switzerland.”

According to the note, those smaller economies still represented 60% of the foreign income multinationals reported in 2019 – “more than 1.5 times the rest of the world.” In 2000, that amount was closer to 30%.

Screen Shot 2021 04 20 at 2.00.35 PM
Chart via BofA Research.

The chart notes that the 2017 Tax Cuts and Job Acts (TCJA) – Trump’s signature tax package – did include a few measures meant to discourage this “profit sharing.” That’s the same package that included a decrease of the corporate tax rate to 21% from 35%. After its passage, the amount of money pouring into these tax havens leveled out, and was no longer rising, “but the share did not decrease meaningfully and so profit shi┼┐ting remains a major concern.”

Biden’s Made in America Tax Plan specifically targets profit shifting, and “would also eliminate the tax laws
embedded in the 2017 TCJA that incentivize the offshoring of assets,” according to the Department of Treasury.

Before a global minimum tax passes, it would need OECD members to agree on a framework for the policies they want to implement. As BofA notes, a few major tax havens are in the EU, which would have to pass any proposal unilaterally. And there could be resistance in America, with at least one Republican – Senator Pat Toomey (R-Pa.) – speaking out against it.

But change is probably still on the way.

“What is clearer, in our view, is that the current political environment is ripe for progress on the issue,” BofA said. “Given the rise in global debt because of the pandemic and the fiscal response, taxes will likely have to increase in many countries. The US probably has the most leeway to continue running large deficits, but it is leading the charge on the global minimum tax.”

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Over half of Americans see a wealth tax as a way to help solve inequality, poll finds

Elizabeth Warren
Sen. Elizabeth Warren (D-MA).

  • The idea of a wealth tax is gaining steam as a way to address economic inequality and recovery.
  • The majority of respondents in a new poll see a wealth tax as one way to address inequality.
  • The IRS chief told Congress it’s possible that over $1 trillion in taxes go uncollected each year.
  • See more stories on Insider’s business page.

Growing wealth inequality has been exacerbated by the pandemic, as the global middle class shrinks and millions fall into poverty. One question has lingered: What can be done to address both the economic scars of the pandemic, and the inequality that’s grown alongside them?

For some, including Sen. Elizabeth Warren, wealth taxes are one answer, and the idea is more popular than it used to be. Even formerly moderate groups like the International Monetary Fund have called for one-off wealth taxes to help support an economic recovery.

It’s a measure that could also be popular with voters. A new poll from Hill-HarrisX of 2,813 registered voters asked respondents, “Which comes closest to your view about the wealth tax proposed by Democrats for individuals with a net worth over $50 million?”

Of those respondents, 56% found wealth inequality to be a “significant problem facing the country,” with billionaires paying a wealth tax part of the solution. Conversely, 44% of respondents considered it unfair to impose an additional tax on people who already pay income taxes because because that would become “a penalty for being rich.”

There was a particularly stark partisan divide, as The Hill notes: 77% of Democrats answered that a wealth tax was part of the solution, compared to 35% of Republicans.

The current state of taxes in the US

Warren wants to tax the ultrawealthy, and campaigned on it during her 2020 presidential run. Her Ultra-Millionaire Tax Act targets households with net worths exceeding $50 million, proposing a 2% tax on those with a net worth between $50 million and $1 billion, and a 3% tax on those with over $1 billion.

She’s not the only politician looking to change up how American taxes work: Sen. Bernie Sanders, another wealth tax supporter, has introduced two pieces of legislation targeting the wealthy and corporation by reforming the estate tax and corporate tax.

Meanwhile, President Joe Biden, who hasn’t explicitly backed a wealth tax, wants to hike taxes on corporations and American households making over $400,000.

Biden’s corporate tax hike is meant to finance his recently proposed American Jobs Plan. A Morning Consult/Politico poll found that 57% of voters said they would be more likely to support a $3 trillion plan funded by tax increases on Americans making over $400,000, compared to 47% of voters who said that they’d be more likely to support a $3 trillion funded by a corporate tax increase.

A recent study from IRS researchers and economists found that the wealthiest Americans may not even be paying the full amount of taxes they owe, with the top 1% of Americans not reporting about 21% of their income. At a Senate Finance Committee hearing last week, IRS Commissioner Charles Rettig said that that over $1 trillion in taxes could be going uncollected every year.

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Biden reportedly briefed major bank CEOs before unveiling infrastructure plan, corporate tax hike

Biden
President Joe Biden has framed his infrastructure plan as a means of strengthening democracy and undermining autocracy.

  • President Joe Biden’s infrastructure package includes an increase in the corporate tax rate.
  • He briefed several bank CEOs on the package the morning before the announcement, the WP reports.
  • Business had a mixed response to it, while it has broken clearly with the GOP on several issues.
  • See more stories on Insider’s business page.

President Joe Biden wants to increase taxes on corporations with his American Jobs Plan – and he let some leading business executives know before he announced it.

According to The Washington Post, the Biden administration briefed Brian Moynihan, the CEO of Bank of America, and David M. Solomon, the CEO of Goldman Sachs – along with “four other chief executives of the country’s biggest banks” – the morning of the infrastructure plan’s announcement.

They weren’t the only ones briefed, according to the Post; “in a 24-hour period,” groups like the Business Roundtable, the Chamber of Commerce, and National Association of Manufacturers also heard from White House officials, with outreach to thousands of small businesses also being planned.

All three of those groups have raised public objections: The Chamber of Commerce has come out against the corporate tax hikes, as have the Business Roundtable and the National Association of Manufacturers.

According to the Post, Commerce Secretary Gina Raimondo “has spoken to more than 50 leading executives in recent days about the plan.”

On the whole, the business reaction to that hike has certainly not been uniform, with CEOs surveyed by the Business Roundtable saying that the increase could impact hiring and wage raises, but Amazon CEO Jeff Bezos saying he supports an unspecified increase to the corporate tax rate, while Lyft cofounder and President John Zimmer supports the 28% rate.

But overall, the reaction from the business community has been somewhat tepid, as many businesses have opted to stay silent. The Post partially attributes this to the weakened relationship between the business community and the GOP, which accelerated after the January 6 insurrection on the Capitol.

Many prominent business leaders – including at least one who had previously supported President Donald Trump – spoke out against those attacks. More recently, some businesses have stepped up to voice their support for voting rights and access following the passage of a restrictive voting bill in Georgia, as some activists called for boycotts of companies that did not take action.

Republicans have come out against the proposed increase, which would bring the corporate tax to 28% from 21%. That’s still lower than the 35% rate in place prior to the Trump administration’s 2017 tax cuts. As Insider’s Joseph Zeballos-Roig reported, the GOP has instead been suggesting that average people shoulder the cost of infrastructure improvements in the form of “pay-fors.”

But another reason that the response has been tepid could be a looming compromise: Axios reported that Senate Democrats will push a 25% corporate tax rate, an amount that powerful moderate Sen. Joe Manchin has signaled his support for.

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AOC calls SALT deduction a ‘gift to billionaires,’ opposes effort to hold up infrastructure bill

GettyImages 1133079473
Rep. Alexandria Ocasio-Cortez (D-NY).

  • Repealing a cap on the state and local taxes deduction would be “a giveaway to the rich,” Rep. Alexandria Ocasio-Cortez said Thursday.
  • The Trump tax cut of 2017 slashed the SALT deduction to $10,000 from an unlimited amount.
  • Some Democrats want to get rid of the cap, as itemized deductions can be very high in blue states like New York and California.
  • See more stories on Insider’s business page.

Rep. Alexandria Ocasio-Cortez, the democratic socialist known as “AOC,” is breaking with members of her party who want to undo a major part of Trump’s 2017 tax cut, accusing them of favoring an unequivocal “giveaway to the rich.”

That would be the federal cap on the state and local tax (SALT) deduction, which some Democrats in high-income-tax states have been working to roll back for four years now.

House Speaker Nancy Pelosi, for example, calls the cap on the SALT deduction “mean-spirited” and “politically targeted,” arguing that former President Donald Trump’s White House designed this policy to hurt the wealthy in blue states, in particular. Others even want to hold up one of President Joe Biden’s top legislative priorities if they don’t get their way. That would be the $2.3 trillion infrastructure plan Biden unveiled this month, the first of a two-part package, which he would like to fund with tax revenue rather than deficit-finance.

“I don’t think we should be holding the infrastructure package hostage for a 100% repeal of SALT,” Ocasio-Cortez told Huff Post’s Igor Bobic, according to a pool report. “I think we can have a conversation about the policy, but it’s a bit of an extreme position, to be frank.”

The politics of SALT can be a bit confusing. In 2017, Republicans capped the SALT deduction at $10,000, a progressive reform in an otherwise regressive bill.

But this particular giveaway – enabling taxpayers who itemize their returns to lower their bill to the IRS – has an unusually high number of liberal fans who argue that it only penalizes the better-off in parts of the country that have solidly Democratic governments (and their generally higher tax rates).

The argument has flared up again as Congress debates Biden’s $2.3 trillion infrastructure plan – and how to pay for it. So far, the White House has proposed partially rolling back another aspect of the 2017 tax cut, which slashed corporate tax rates from 35% to 21%; he wants to raise it back to 28%.

But some in the president’s party are threatening to oppose any legislation that does not also reduce some of the federal government’s ability to collect taxes from those who claim the now-restricted SALT deduction.

“No SALT, no deal,” Rep. Thomas Suozzi, another New York Democrat, told The Hill.

Ocasio-Cortez, however, argued that it would not be “just” to simply abolish the cap.

“I think it’s just a giveaway to the rich,” she said, “and I think it’s a gift to billionaires.”

Experts more or less agree. In a 2019 piece for Insider, Scott Eastman, federal research manager at the Tax Foundation, wrote that repealing the cap would “almost exclusively benefit wealthy taxpayers, making the tax code less progressive” – and depriving the federal government of money it will need to fund Democrats’ agenda.

Have a news tip? Email this reporter: cdavis@insider.com

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GOP senators oppose corporate tax hike as ‘non-negotiable red line’ as they float taxes on drivers to pay for infrastructure

Shelley Moore Capito
Sen. Shelley Moore Capito (R-WV).

  • Sen. Shelley Moore Capito said Republicans were strongly opposed to corporate tax hike.
  • “I think that’s a non-negotiable red line,” she said, and other top Republicans around her agreed.
  • Republicans are drafting an infrastructure plan that may be mostly financed with taxes on drivers.
  • See more stories on Insider’s business page.

Republican Sen. Shelley Moore Capito of West Virginia said that GOP senators won’t budge from their resistance to hiking corporate taxes, a key element in President Joe Biden’s infrastructure plan.

“I think that’s a non-negotiable red line,” Capito told reporters on Thursday of her party’s opposition to increasing corporate taxation.

Other Republican senators at the news conference said they agreed with Capito. The group also included Sens. John Barrasso of Wyoming, Roger Wicker of Mississippi, Deb Fischer of Nebraska, and John Cornyn of Texas.

Democrats assailed the Republican comments. Sen. Ron Wyden of Oregon, chair of the Senate Finance Committee, called the red line a “completely unreasonable” position.

“Republicans’ insistence that the most profitable companies in the world shouldn’t contribute a single penny to investments in roads, schools and our clean-energy future is simply not acceptable,” Wyden said in a statement.

A faction of Senate Republicans in recent days appeared to be prepping a $600 billion to $800 billion infrastructure counterproposal to Biden’s $2.3 trillion package. Several lawmakers suggested financing the plan with a vehicle mileage tax on electric vehicles or raising the gas tax.

“I think we still haven’t defined what we mean by infrastructure and what’s going to be included and so how much it’s going to be, we don’t really have an idea,” Sen. Mitt Romney of Utah told reporters on Thursday. “It’s a very early process that we’ve engaged in.”

Still, other Democrats described the $800 billion indicated by Capito as too meager to address the country’s infrastructure needs. “We’re going to do whatever it takes. If it takes $4 trillion, I’d do $4 trillion but we have to pay for it,” Sen. Joe Manchin of West Virginia told reporters on Thursday.

A JPMorgan economic research note on Thursday found that, although the corporate tax rate was higher than the global average before former President Donald Trump’s 2017 tax cut, the US had a lower ratio of corporate tax revenues to GDP dating back to 2000.

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