Senate Democrats on Wednesday unveiled a new billionaires’ tax proposal, an entirely new entry in the tax code designed to help pay for Joe Biden’s sweeping domestic policy package and edge his party closer to an overall agreement on a shrunken version of the administration’s $3.5tn flagship legislation.
The proposed tax would hit the gains of those with more than $1bn in assets or incomes of more than $100m a year, and it could begin to shore up the big social services and climate change plan Biden is racing to finish before departing this week for the global climate summit in Scotland, Cop26.
The new billionaires’ proposal, coupled with a new 15% corporate minimum tax, would provide alternative revenue sources that Biden needs to win over one key Democrat, Senator Kyrsten Sinema of Arizona, who had rejected the party’s earlier idea of reversing the Trump-era tax breaks on corporations and the wealthy to raise revenue.
Biden met late on Tuesday evening with Sinema and another Democratic holdout, Senator Joe Manchin of West Virginia, at the White House.
With the US Senate evenly split 50-50 between Republicans and Democrats, Biden needs every Democratic senator on board in order to pass the budget bill with the allowable simple majority, using the so-called reconciliation process – with Vice-President Kamala Harris as the casting vote in the traditional roll of president of the Senate.
“No senator wants to stand up and say, ‘Gee, I think it’s just fine for billionaires to pay little or no taxes for years on end’,” said Democratic Senator Ron Wyden of Oregon, chairman of the Senate finance committee, in helming the new effort at a framework agreement as early as Wednesday.
Biden and his party are homing in on at least $1.75tn in healthcare, child care and climate change programs, scaling back what had been outlined as a $3.5tn plan, as they try to wrap up negotiations.
Taken together, the new tax on billionaires and the 15% corporate minimum tax are designed to fulfill Biden’s desire for the wealthy and big business to pay their “fair share”.
They also fit his promise that no new taxes hit those earning less than $400,000 a year, or $450,000 for couples. Biden insists all the new spending will be fully paid for and not piled onto the national debt.
While the new tax proposals have appeared agreeable to Manchin and could win over Sinema, the idea of the billionaires’ tax has run into criticism from other Democrats as cumbersome or worse.
Representative Richard Neal of Massachusetts, the chairman of the powerful Ways and Means committee, said he told Wyden the billionaires’ tax may be more difficult to implement than the route his panel took in simply raising rates on corporations and the wealthy.
And there are questions about its constitutionality that could risk legal appeals blocking its implementation.
Overall, the billionaires’ tax rate would align with the capital gains rate, now 23.8%. Democrats have said it could raise $200bn in revenue that could help fund Biden’s package over 10 years.
“I’ve been talking about this for years,” said progressive Elizabeth Warren, the Massachusetts senator who ran against Joe Biden to be the Democratic nominee for president and has long campaigned for finance reform and a wealth tax.
“I’ve even made billionaires cry over this,” she said.
Republicans have derided the billionaires’ tax as “harebrained”, and some have suggested it would face a legal challenge.