Moving a tax bill. The House Ways & Means Committee will continue work on its provisions of the Build Back Better Act. The panel begins Day 3 of its markup today and will continue tomorrow, including the now released legislative amendment that details the House Democrats’ tax plan.
The big score. The Joint Committee on Taxation figures that Ways & Means Chair Richard Neal’s draft would cut taxes by about $1.2 trillion over the next decade and raise them by roughly $2.1 trillion. That would leave a net tax hike of about $900 billion to help pay for the Democrats’ massive social spending bill.
What is missing? While the Ways and Means draft is extraordinarily ambitious, it left out some controversial ideas. No proposals on reworking the state and local tax (SALT) deduction. Nothing on Biden’s proposal to tax unrealized capital gains at death.
“Hold the SALT,” say some Democrats, again. A group of moderate Democrats say they will not support the $3.5 trillion budget plan if it does not adjust the federal $10,000 cap on state and local tax deductions. A spokesperson for Speaker Nancy Pelosi confirmed that a SALT cap repeal (or at least a partial roll-back) is an “important priority in the reconciliation bill.”
The wealthiest in higher tax states would pay a lot more in tax under Neal’s plan. CNBC reports on the impact on the very wealthiest filers. New York City taxpayers who earn more than $5 million would pay a top marginal federal income tax rate of 39.6 percent plus a 3 percentage point surtax, resulting in a top federal rate of 46.4 percent. On top of a combined state and city tax rate of 14.8 percent, that’s a top marginal rate of 61.2 percent. Top earning Californians would pay 59.7 percent; New Jersey’s would pay 57.2 percent, and Hawaii’s 57.4 percent.
Proposed tax incentive for union-made electric vehicles riles Toyota and Honda. The two automakers say Neal’s proposal to give manufacturers of union-made electric vehicles an additional $4,500 tax subsidy discriminates against non-union American autoworkers. Electric vehicles made by automakers like GM, Ford, and Fiat Chrysler, would qualify for a total tax credit of up to $12,500, including a $500 tax credit for using US-manufactured batteries, while electric vehicles made by non-union firms like Toyota, Honda, and Tesla, would qualify for a maximum credit of $7,500. Is the goal to curb climate change or reward unions?
Tune in Thursday for TPC’s Prescription with Valerie Wilson. Wilson, director of the Economic Policy Institute’s Program on Race, Ethnicity, and the Economy, will explore how budget and tax provisions being debated in Congress address economic inequities. You can register for the noontime event and tune in to her conversation with TPC’s John Buhl here.
UK business group to UK finance minister: Stop raising taxes. The Confederation of British Industry urged the government to stop increasing business taxes and instead offer more assistance to meet challenges presented by Brexit, COVID-19, and climate change. The Johnson government will present its three-year budget on Oct. 27.
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