Biden has proposed hiring 87,000 new Internal Revenue Service workers over the next decade.
Rep. Lauren Boebert criticized the increase in employees, saying it was to monitor billionaires.
Musk paid no federal income tax in 2018, the same year he was the world’s second-richest person.
On Sunday, US Rep. Lauren Boebert, R-Colo., and Tesla CEO Elon Musk tweeted out their disapproval of the Biden administration’s proposal to expand the Internal Revenue Service’s number of employees under the Build Back Better agenda.
Under the proposal, the IRS would hire nearly 87,000 new workers over the next decade in an effort to close the “tax gap” by collecting unpaid taxes owed by large corporations, partnerships, and wealthy individuals, Politico reported.
Boebert compared the proposed increase in IRS workforce to Tesla and Apple, which employ 70,000 and 154,000 individuals, respectively.
“The IRS already has dedicated audit teams for high net worth individuals. The doubling of staff is for everyone else,” Musk replied to her on Twitter.
According to a May report from the Department of Treasury, the tax gap — the difference between taxes owed to the government and what is actually paid — will rise to more than $7 trillion over the next decade, or roughly 15% of taxes owed.
“These unpaid taxes come at a cost to American households and compliant taxpayers as policymakers choose rising deficits, lower spending on necessary priorities, or further tax increases to compensate for the lost revenue,” the report said. “The tax gap disproportionately benefits high earners who accrue more of their income from non-labor sources where misreporting is common.”
The Roth 401(k) and Roth IRA are two of the many options you can choose from in deciding how to invest. Though the names are similar, these plans differ in several important ways. Which one is the right fit for you will depend on your age, time horizon, annual income, and financial goals.
Roth 401(k) vs. Roth IRA: At a glance
The term 401(k) refers to the tax code in which these employer-sponsored plans were created. IRA stands for independent retirement arrangement. The key difference between the Roth versions of these types of accounts and their traditional counterparts is how the tax advantages work.
A Roth 401(k) is offered by employers. Similar to a traditional 401(k), this type of plan is provided as a benefit. Unlike a traditional 401(k), the contributions you make to a Roth 401(k) are with after-tax dollars. Qualified withdrawals are tax free.
A Roth IRA isn’t tied to an employer. If you meet the eligibility requirements, you can save for retirement using a Roth IRA through a brokerage like Fidelity or Vanguard and invest after-tax dollars. Qualified withdrawals are also tax free.
“‘Roth’ means that the accounts are funded with after-tax dollars,” explains Brandon R. Amaral, a certified financial planner and founder at Amaral Financial Planning. “You don’t receive a tax deduction, however any growth in the account is tax free.”
What is a Roth 401(k)?
The Roth 401(k) was established under sweeping tax-reform legislation passed in 2001. It combined elements that already existed in a traditional 401(k) with those of the Roth IRA . Employers were given the option to implement the Roth 401(k) in 2006.
Roth 401(k) accounts are only available through your employer. As part of your benefits package, your employer may match your contributions up to a certain percentage. However, it’s important to note that any Roth 401(k) contributions by your employer are made with pre-tax dollars to a traditional 401(k) account that is taxable upon withdrawal. The contributions you make are after tax, and post-retirement distributions are tax free.
On top of that, you want to be aware of vesting, which refers to ownership of the retirement account as it relates to employer contributions. Your employer may have certain time requirements for you to meet until you’re 100% vested, or in other words, entitled to all the money in the retirement account. Your own contributions are immediately 100% vested.
Roth 401(k) accounts don’t offer any tax breaks now, as you use after-tax dollars. But the benefit is that you get earnings and withdrawals tax-free later on if it’s a qualified distribution. You must be 59 ½ or older to qualify for tax-free withdrawals. If you withdraw before then, you could be hit with a 10% early withdrawal penalty and owe income tax. There may be certain situations such as death and disability where you can avoid these penalties.
One of the benefits of a Roth 401(k) vs Roth IRA is that you can contribute more to your account.
“With a Roth 401(k), you can contribute up to $20,500 ($27,000 if you are over 50) in 2022,” notes Amaral. “With a Roth IRA, you can contribute up to $6,000 ($7,000 if you are over 50) in 2022.”
When you reach retirement age, you can enjoy your funds tax-free. You must take a required minimum distribution by age 72, if you haven’t already. A Roth 401(k) can be a good choice if you’re in a low tax bracket now and expect to be in a higher tax bracket come retirement.
Roth 401(k) pros and cons
They have a higher annual contribution limit.
There are no income limits.
Qualified distributions are not taxed.
Investment earnings are tax-free if taken out under a qualified distribution.
You must take distributions by age 72.
They’re only available through your employer.
Contributions aren’t tax deductible and won’t reduce your taxable income.
Early withdrawals may include a 10% penalty.
What is a Roth IRA?
A Roth IRA is an account that you can use to invest for retirement on your own, without an employer. You use after-tax dollars now, so you avoid paying taxes later on when it’s time for a distribution. The big difference between a Roth IRA and a Roth 401(k) is its flexibility.
“Roth IRAs also allow penalty-free distributions for first-time home purchases, education expenses and unreimbursed medical expenses,” Amaral says.
Roth IRAs are good for young investors who expect to be in a higher tax bracket later on. However, there are income eligibility requirements to contribute to a Roth IRA. The amount you can contribute is much less than a Roth 401(k). The maximum is $6,000, or $7,000 if you’re 50 or older. But it may be good in exchange for the flexibility a Roth IRA comes with.
“While you can save more for retirement in a Roth 401(k), a Roth IRA offers more flexibility for withdrawals. With a Roth IRA, you are able to withdraw your contributions after five years to avoid any taxes or penalties,” notes Amaral.
But first you need to see if you even qualify for a Roth IRA.
You can contribute up to the limit if you’re single and your modified adjusted gross income (AGI) is less than $129,000. If it’s beyond that up to $144,000, you can only contribute a reduced amount. If you’re married, you can contribute up to the limit if your modified AGI is less than $204,000. If it’s beyond that up to $214,000, you also can only contribute a reduced amount. If your income goes beyond these thresholds, you’ll no longer be eligible to contribute.
One of the benefits a Roth IRA has over a Roth 401(k) is that there are no required distributions while the account owner is alive. So you can take money out when you want, and never be forced into it. The money can also be used for first time home-buying or health insurance premiums while unemployed, which makes it an attractive and flexible retirement savings vehicle.
Though there is more flexibility with withdrawals using a Roth IRA, if you tap the earnings on your investments before age 59 ½, that money will probably be taxed as regular income, plus a 10% penalty, with certain exceptions.
Roth IRA pros and cons
You can withdraw funds tax-free.
Earnings on the investments grow tax free.
They have more flexibility with regards to the timing of withdrawals.
There are no minimum required distributions.
Contributions aren’t eligible for tax deductions.
There are income requirements in order to qualify.
They’re self-administered and have no employer match available.
The annual contribution limits are relatively low.
The financial takeaway
Though both Roth 401(k) and Roth IRA accounts use after-tax dollars and both are used for retirement, they vary in who they are geared toward as well as who is eligible. For example, a Roth 401(k) is only available through your employer, while a Roth IRA is only available to you if you meet certain income requirements. The amount investors can invest is also a big consideration.
“The main considerations for choosing which retirement vehicle is for them is their short-term goals, current cash flow, and time horizon to retirement,” notes Amaral. “If you are young, it may be wise to contribute to a Roth IRA and keep your assets liquid to help fund a potential home purchase or wedding. If you are in your 50s, you can save more money toward retirement to catch up in case you are behind.”
Sen. Elizabeth Warren’s office released a report on Thursday on Democrats’ proposed corporate tax.
The report found that major firms like Facebook and Amazon would have owed millions more.
While Democrats have backed down on many tax hikes, this one has sign-off from key centrist Kyrsten Sinema.
Democrats are gearing up to make corporations pay up in their social spending package — and the resulting taxes could bring in millions from some of the country’s biggest corporations.
On Thursday, Sen. Elizabeth Warren’s office released a report looking at the impact of the proposed Corporate Profits Minimum Tax, which she spearheaded along with Sens. Angus King and Ron Wyden. Under that tax, companies reporting over $1 billion in profit would be subject to a 15% tax. Warren’s office looked at how the tax stacks up with what companies paid in 2020, and found some gaping differences.
For instance, per Warren’s report — which used data from the nonpartisan Institute on Taxation and Economic Policy — some of the biggest names in business would have owed millions more. Amazon would have owed $3.6 billion, rather than the $2.8 billion in paid on $24.2 billion in profits. That’s a gap of $836 million between the new tax and what Amazon paid in 2020.
“Billionaire corporations have gotten a free ride in America for too long,” Warren said in a statement on the report. “It’s time to stop letting giant corporations cheat the system — they should pay taxes just like everyone else.”
It’s not the first time that Warren has criticized Amazon — and its founder — on taxes. When former CEO and founder Jeff Bezos launched himself into space, he said he wanted to thank “every Amazon employee” and customer, because “you guys paid for all of us.”
Warren fired back, writing in a Tweet: “Jeff Bezos forgot to thank all the hardworking Americans who actually paid taxes to keep this country running while he and Amazon paid nothing.” As Insider’s Lynnley Browning reported, Amazon ultimately paid no income taxes in 2017 and 2018. Bezos retired as Amazon CEO on July 5, 2021.
Other big companies that would owe more include Facebook, the creation now known as Meta. It would have paid up to $469 million more. Amazon and Facebook did not immediately respond to Insider’s request for comment.
The corporate minimum tax is one of the only tax increases Democrats have been able to coalesce around to pay for their social-spending package. Importantly, it has the sign-off of key centrist Sen. Kyrsten Sinema of Arizona. Sinema previously sunk proposals to bring up the corporate income tax rate from 21%, and to raise the top tax rate for individuals. Warren’s plan is meant to help stop large firms from using legal loopholes to reduce their tax burdens.
The nonpartisan Joint Committee on Taxation says the measure would raise nearly $319 billion over 10 years.
“My report makes it clear that it’s time for corporations to stop cheating the system & start paying taxes like everyone else,” Warren tweeted. “I’m going to keep fighting for a Corporate Profits Minimum Tax to raise over $300 billion so we can invest in child care, housing, clean energy & more.”
Cathie Wood believes the bull market for stocks has shown its strength by shrugging off mounting price pressures, and unless an economic downturn hits, it’ll probably keep up its winning ways.
The Ark Invest chief acknowledged the “wall of worry” being climbed by investors faced with hot-running inflation, speaking in an interview with Barrons on Wednesday.
But Wood pointed to how equity markets shrugged off bond moves earlier this year.
“If you look at the bond market — even though we had a doubling in bond yields for the first quarter, the stock market was up, despite that heart attack in the bond market,” she said.
“That was a loud signal to us that we’re in a very strong bull market, and as long as we don’t fall into a recession, we’re probably going to be fine,” Wood added.
After US inflation climbed to a 31-year high last week, government bond yields surged on the prospect it might prompt the Federal Reserve might move faster on an interest rate hike. Some analysts predict high inflation could last until the second half of 2022.
Yet the US stock market has hit record high after record high. The S&P 500 has risen by 25% so far this year, driven by robust corporate earnings and evidence of the strength in the underlying economy. Wood’s flagship ARK Innovation fund has fallen 8% this year, but over the past three years, it’s gained 175%, compared with a 75% gain in the S&P.
Wood laid out her reasoning for remaining upbeat, based on her experience of inflation and markets in recent years.
The popular stock picker said the strongest bull markets she has been involved with have typically climbed a wall of worry, and when she started out in the 1980s, the worry was inflation – though it was going down, in a cyclical sense.
“Last year, growth stocks, especially those associated with innovation like our strategies, were on fire — we could do nothing wrong. We didn’t think that was going to be a very healthy market if it continued to narrow.”
This year, though, the market has broadened out, Wood said. She noted that value stocks, cyclical stocks and even defensive stocks have done quite well in the face of changes in the economy, as it reopens from the COVID-19 pandemic.
Another cloud hanging over stock markets is the proposal to introduce a 15% global corporate minimum tax, agreed at teh G20 Summit in late October. One part of the plan would let countries tax profit in excess of 10% of revenue at multinationals.
“What I think is going on: The market is climbing a massive wall of worry, and is effectively saying, ‘No, we’re not going to be clobbered with these tax rates in this next proposal. This inflation will not be sustained. In fact, it’s going to unwind pretty quickly,'” Wood said.
Argentina updated its “check tax” rules on Wednesday to clarify that crypto exchanges are not exempt.
That means crypto sales and purchases are subject to the tax of up to 0.6% on banking debits and credits.
The move is likely to drive up the price of digital currencies for those with Argentine pesos, according to a local expert.
Argentina is now taxing cryptocurrency sales and purchases, after its government updated existing rules to clarify that crypto exchanges are not exempt from collection.
A “check tax” of up to 0.6% on credits and debits is placed on banking transactions — such as cash deposits, wire transfers and checks themselves — in Argentina. But transactions involving digital currencies were not considered to fall under the rules.
That changed Wednesday, when the government spelled out how the tax collection measure affects payment service providers.
“The exemptions provided for in this decree and in other regulations of a similar nature will not be applicable in those cases in which the movements of funds are linked to the purchase, sale, exchange, intermediation and/or any other operation on crypto assets, cryptocurrencies, digital currencies, or similar instruments, in the terms defined by the applicable regulations,” it said in a decree updating the measure.
The clarification, which came into force immediately, means crypto exchanges and similar businesses with Argentine bank accounts are now expected to comply with the tax rules. The measure is likely to hit local brokers harder than those based abroad.
Governments around the world are looking at the crypto industry as a potential source of tax income, as the adoption and popularity of digital assets surges.
In the US, an infrastructure bill signed into law on Monday brought in new rules for crypto brokers, which now have to report transactions over $10,000 to the tax authorities. Taxes on digital assets could raise as much as $28 billion in funds, The New York Times reported.
In Argentina, the government’s tax decision is likely to drive up the price of cryptocurrencies for those buying in pesos, a senior executive at an Argentine exchange told CoinDesk.
It also could open the door for more action on digital assets from regulators, as digital cash booms in the country. In August, the president of Argentina’s central bank, Miguel Pesce, raised risks around price volatility and consumer protections as factors officials were closely monitoring.
“We are concerned about the development of cryptocurrencies,” he said at a virtual meeting, according to a report in local news outlet Clarin.
The sale comes as the Tesla CEO exercised options to buy 2.1 million stocks at $6.24 each, one of the filings showed. Musk is required to pay income taxes on the difference between the exercise price and fair market value of the shares, which closed at $1,013.39 on Monday.
It’s the second time in less than two weeks that the billionaire has exercised his stock options. On November 8, Musk exercised options to acquire nearly 2.2 million shares, a regulatory filing shows.
Some of the billionaire’s stocks sales today are part of a trading plan established in September, the SEC filings show.
Musk still has millions of stocks options he needs to exercise before their expiry next August.
Musk’s Twitter survey and share sales come amid intense debates in the US over whether the wealthy are paying enough in taxes. The Tesla CEO is the richest man in the world, with a net worth of $279 billion, according to the Bloomberg Billionaires Index.
Democrats are still hashing out the final form of President Joe Biden’s social spending plan.
Currently, it doesn’t include repeal of a Trump-era policy that cut tax breaks for people in wealthy states.
But some Democrats want to bring it back; it also has an outsized impact on their constituents.
If you’re confused about what is or isn’t going to be in Democrats’ proposed social spending plan, you’re not alone.
A proposal for a billionaires’ tax lasted less than a day. An increase on the top rate for high earners is also gone. A new surtax on multimillionaires and billionaires appeared in their place. But Democrats are still fixated on rolling back a Trump-era rule that actually hindered tax cuts for residents of wealthier areas.
It’s called the SALT deduction, and it’s a tax break you can claim for state and local taxes. Trump’s 2017 tax plan capped the deduction at $10,000; it was previously unlimited. A group of House Democrats – in states with the highest local taxes – want to remove that cap, which would give a lot of money back to their wealthy constituents.
It’s not currently in the framework released by the White House, but “SALT will be in the endgame, yes,” according to House Ways and Means Chairman Richard Neal.
A report from the right-leaning Tax Foundation found that areas in New York, New Jersey, and California were among the top 10 counties with the highest state and local taxes. Representatives from all of those states have formed a bipartisan SALT Caucus that calls for restoring the deduction.
“This issue is so critical to our state and our constituents that we will reserve the right to oppose any tax legislation that does not include a full repeal of the SALT limitation,” some of the group said in an April letter.
Paradoxically, as Democrats look to equalize the tax burden and make wealthier Americans pay more, the combination of removing the deduction and an increase on people earning over $400,000 could pay off for “high-income coastal professionals,” The Wall Street Journal’s Richard Rubin reports.
Indeed, tax expert Howard Gleckman at the nonpartisan Tax Policy Center wrote in a blog post earlier this year that households earning above $1 million annually would receive half the benefit. Around 93% of those households would get a tax cut averaging $48,000.
In stark contrast, 96% of middle-income households – those earning between $52,000 and $96,000 – would experience zero change in their tax bills.
The issue is dividing Democrats on ideological lines. Speaker of the House Nancy Pelosi has said that the cap is “mean-spirited” and “politically targeted,” because it targets high earners in blue states. But key progressive Alexandria Ocasio-Cortez doesn’t quite agree.
“I think it’s just a giveaway to the rich,” the New York representative said in the spring. “And I think it’s a gift to billionaires.”
The following September, the New York representative wrote on Twitter that Congress “should not endorse a full 100% repeal of SALT caps.” She added that wealthy lobbyists have influence with Democrats as well as Republicans, and that a full repeal would benefit the richest of America’s rich.
Democrats can only afford to lose three votes in the House and none in the Senate for the spending bill to pass using a maneuver known as reconciliation. The narrow margin of error may push Democrats to at least partially roll back the measure.
“I cannot imagine that this can get all the votes necessary without some SALT relief,” Sen. Bob Menendez of New Jersey told reporters on Thursday.
A bombshell report from the International Consortium of Investigative Journalists found that some of the world’s wealthiest and most powerful people are socking away billions in offshore accounts – including the onshore, continental state of South Dakota.
Chuck Collins has known that it’s a problem for years. Once an heir to the Oscar Mayer wiener fortune, he learned firsthand how the wealthy hold on to their fortunes and gave his own away. Today, he’s the director of the Program on Inequality and the Common Good at the Institute for Policy Studies, where he delves deep into how the ultrawealthy dodge taxes in America.
In March, he told Insider that Americans largely don’t understand that “we are now the tax haven.” The US is the No. 2 destination for “global kleptocratic capital,” he said, much of which ends up in places like Delaware and Wyoming – and South Dakota.
The ICIJ confirmed Collins’ research, finding that over the past decade, the amount of customer assets in South Dakota has “more than quadrupled” to $360 billion. The ICIJ looked at nearly 12 million financial records that detail over 29,000 offshore accounts, with hundreds of journalists around the world poring over them, in partnership with outlets including the Washington Post and the Guardian The leak is called the Pandora Papers, following similar leaks called the Panama Papers and Paradise Papers.
All told, 17 US states are in the top 20 jurisdictions that “have the most liberal trust laws” worldwide, according to a paper by Hebrew University law professor Adam Hofri-Winogradow, which was cited by the ICIJ. The ICIJ found 81 trusts in South Dakota alone.
The great plains state changed its laws in the 1980s to become more favorable to these kinds of trusts, according to Collins, who recently authored “The Wealth Hoarders,” a deep dive into the growth of what he calls the “wealth defense industry.” That’s the growing system of lawyers, family offices, and more who help wealthy clients wiggle out of taxes and hold onto wealth – and it has ballooned in the past decades.
In 1983, South Dakota got rid of its rule against perpetuities – what Collins calls an “arcane legal thing” that effectively means when you place money in a trust, it has to be dissolved at some point.
“At that point, there’s often a taxable moment,” Collins said. That could be something like the estate tax or gift tax, but “South Dakota said that ‘We’re going to attract trusts by eliminating that law, making them anonymous, making it possible that you can open up a trust and not actually have to live in the state.'”
That means if you put money in a trust in South Dakota, “you’re essentially sequestering money beyond the reach of tax authorities in perpetuity,” according to Collins. Perpetuity is another word for forever.
If you live in South Dakota, you might be wondering where all of that money is hiding. Collins said it’s probably not physically in the state. Instead, it may be parked in luxury real estate or art around the world. Only the trust itself has to be legally filed in South Dakota.
“We are emerging from a pandemic where essentially the wealthiest people on the planet have figured out how to sequester their wealth and avoid taxes,” Collins said.
Collins has multiple suggestions for reform, including federal legislation that can override states when they toss rules against perpetuities, as South Dakota did; requiring trusts to be registered and disclosing their owners; a 1% wealth tax on assets’ interest. President Joe Biden has backed a key senator’s tax proposal about the wealthiest’s assets, but in other respects, Democrats so far are leaving many tax loopholes untouched.
One thing is overwhelmingly clear to Collins, and it should scare every American. “The world is going to be looking at us differently after the Pandora Papers. They’re going to see that the United States is the weak link now in the system of global financial transparency.”
House Democrats have floated a suite of tax hikes and changes to pay for the $3.5 trillion reconciliation bill and, by design, America’s highest earners will pony up the most.
A new analysis from the Tax Policy Center finds that the top 1% and top 0.1% would see particularly hefty hikes under the latest proposal, while lower-earning parents would benefit from tax cuts.
Democrats are using a few methods to target high earners. They propose increasing the income tax rate to 39.6% for individuals who earn over $400,000. In addition, the plan hikes up the rate on capital gains – profits from selling assets like stocks and bonds – to 25%. Many of the wealthiest Americans derive a sizeable chunk of their incomes from assets, rather than straightforward wages, and the capital gains tax targets the profits from selling off those assets. The proposal would also bring the corporate tax rate up to 26.5% for companies that bring in over $5 million.
All told, according to the Tax Policy Center, the top 1% would see their taxes go up by about $160,000. For the top .01% – who earn at least $4 million, per the Tax Policy Center – taxes would increase by $1.1 million. Both rates would come in a bit lower if the corporate tax increase is filtered out.
On the other hand, the analysis finds that low- and middle-income parents stand to see significant cuts under the new measures. That’s due to an extension of the Child Tax Credits, which provides direct payments to parents every month. According to the Tax Policy Center, the lowest earning parents would see taxes slashed by about $3,700, which could come in the form of a direct payment. For middle-income families that cut would come to around $3,000.
The Biden administration has repeatedly emphasized more equitable taxes
The tax gap – and who is and isn’t paying taxes – has emerged as one flashpoint for inequality. Earlier this month, Treasury Department researchers found that the top 1% of earners evade $163 billion in taxes annually. President Joe Biden has continually said he’s “sick and tired” of the inequality in the tax system.
“Millionaires and billionaires are paying a lower tax rate than teachers and firefighters. We’re going to restore fairness to the tax code, give working people a much-needed tax cut, and make the investments that will grow our economy for years to come,” Biden wrote in one tweet.
Indeed, White House economists released an analysis earlier this month showing that America’s highest earners pay just above 8% in income taxes. And on Wednesday, Heather Boushey, a member of the president’s Council of Economic Advisers, released a New York Times opinion essay saying that Congress is facing a choice between investing in the middle class or to keep “giving billions in tax handouts to the wealthiest Americans and multinational corporations.”
But the bill containing those potential tax increases is currently facing its own uphill battle. Currently, House Speaker Nancy Pelosi is working to get the bipartisan infrastructure bill passed this week. Progressives have said they’d only vote on that bill if it comes in conjunction with the larger reconciliation package that contains social spending and tax hikes. Now, as moderate Democrats emerge as roadblocks to that larger package, there’s just a bipartisan vote set for this week – and progressives are warning they’ll torpedo the standalone bill.
Heather Boushey, a member of President Joe Biden’s Council of Economic Advisers, sounded off in a New York Times opinion essay on who the government should work for – and who it’s left behind in recent decades.
“Millions of Americans don’t trust the government or its ability to improve their lives, and it’s not hard to see why,” Boushey writes. Instead, she says, politicians from both sides of the aisle have done everything from allowing monopolies to grow to slashing taxes for the wealthiest Americans.
It’s an argument in favor of Democrats’ sweeping reconciliation bill that would unwind some Trump-era tax cuts and funnel money towards social services and lower and middle-income Americans. That bill is currently in jeopardy as progressives and moderates seem unable to agree on shifting from the system Boushey decries to the one she wants.
Boushey writes that it is “now abundantly clear that the problem lies with a government that rewards wealth over work, that serves big corporate interests over working families.” Such a statement from a presidential economic adviser would have been unthinkable in the Obama administration, let alone the Trump one, but the identification of the widening chasm between wealth and work has gone mainstream in recent years, led by groundbreaking work from economists such as Thomas Piketty. Boushey is further confirming Biden’s radical shift on wealth and inequality.
Biden’s White House has been focused on taxes and inequality
Biden’s economic team has repeatedly used the press to hammer home the importance of Democrats’ proposed tax hikes to offset infrastructure as a move to address inequality and close tax gaps.
“The president has put forth a robust tax agenda that rewards work, not wealth, one that will ensure companies pay their fair share and encourage them to keep jobs in America,” Boushey writes.
Last week, White House economists released their own analysis of how much the wealthiest Americans pay in taxes. They found the 400 wealthiest families in America pay about 8.2% in income taxes annually; significantly, they included assets like stocks as part of those incomes.
Under House Democrats’ proposed tax plan, capital gains – the profits from selling assets like stocks – would be taxed at 25% instead of 20%. The wealthiest Americans often derive more of their income from assets, while many Americans rely on wages for income. That means that while lower-earning Americans pay higher income taxes on their wages, wealthy Americans are often taxed at the preferential rate for capital gains. Democrats also want to impose a 3% “surtax” on people earning over $5 million, although that still wouldn’t be an outright wealth tax, since it targets income and not assets.
Democrats also want to hike the corporate rate to 26.5% for companies that earn over $5 million. Both the corporate rate and capital gains increases are lower than Biden’s original proposals.
Boushey writes that Biden’s “vision for the economy” has resulted in the two bills currently going through Congress: a bipartisan infrastructure bill and Democrats’ party-line reconciliation bill. However, both are currently in jeopardy.
Progressives have repeatedly warned that the two bills must move forward together. But moderates have been reluctant to commit to moving the massive reconciliation bill forward, and Pelosi has moved to decouple them. Now, progressives are making noises about torpedoing the bipartisan bill in retaliation.
“Congress has a choice to make,” Boushey writes. “Does it want to grow our economy by investing in the middle class and the public sector, and fundamentally recalibrating the relationship between government and the people it represents, or continue giving billions in tax handouts to the wealthiest Americans and multinational corporations?”