After months of focusing on proposals to increase tax rates on income and capital gains, Democrats are exploring alternatives to fund President Joe Biden’s social spending expansion, according to people familiar with the discussions.
The White House, in a call with top Democrats Wednesday, floated a billionaires’ wealth tax and a tax on stock buybacks as alternatives to rate increases. A person familiar with the call said higher corporate taxes seemed less likely now than individual income-tax increases but talks remain fluid.
Congressional Democrats and the Treasury Department are considering ways to avoid increasing top-line tax rates, according to the people, who requested anonymity because the discussions are not public. The talks come as Senator Kyrsten Sinema of Arizona, a moderate Democrat, has continued to say she won’t vote for a package with increases on the corporate and individual tax rates, according to one of the people.
Sinema has been largely silent about what policies and financing mechanism she would back for the multitrillion-dollar economic package Democrats are now trying to nail down. Republicans have vowed to oppose the bill, and the Democratic caucus must be united for it to pass in the 50-50 chamber.
Spokespeople for Sinema did not immediately respond to an email seeking comment. The potential changes were reported earlier by the Wall Street Journal and Washington Post.
Among the options under discussion: increasing Internal Revenue Service audits of the wealthy; a “minimum book tax” to draw revenue from large corporations that report high profits but have little taxable income; and strengthening rules for multinational corporations.
Biden ‘Hopeful’
Biden told reporters before leaving on a trip to Pennsylvania that he continues to be optimistic about getting an agreement among Democratic factions before the end of the month.
“I’m hopeful. I think we’ll get a good deal,” he said.
It isn’t clear how extensively Democrats will need to redo their plan for the revenue portion of the economic package. Democrats gained more flexibility in recent weeks to fund the bill as lawmakers moved toward cutting the overall cost from $3.5 trillion to about $2 trillion.
Several of the options under discussion could face political, legal or administrative challenges that could complicate finalizing the legislation.
Proposals to require banks to release account-flow data to the IRS have faced significant blowback in recent weeks. Legal and tax scholars have questioned whether a wealth tax is constitutional, and if so, if the IRS could enforce it. Minimum taxes on domestic income can have unintended interactions with Democrats’ goal to increase manufacturing in the U.S.