House Democrats have proposed raising the corporate rate to 26.5%, the top capital gains tax rate to 25% and the top individual tax rate to 39.6% as part of tax increases needed to pay for their $3.5 trillion spending package. That 25% rate on capital gains is subtantially lower than 39.6% rate for both income and capital gains over $1 million that contemplated in President Biden's initial proposal.
The Ways and Means Committee’s tax package also calls for a new 3% surtax on people making more than $5 million, according to Politico, which cited sources familiar with Chairman Richard Neal’s still-unreleased plan.
Neal’s package is the House’s opening bid in negotiations with the Senate as they consider a menu of possible tax increases to pay for the Biden administration's reconciliation package to pay for a dramatic expansion of the government’s safety nets.
The package would also create a top capital gains rate of 25%—28.8% when the Medicare surtax for high earners is included—up from the current rate of 20%.
The proposals would cover about 82% of the Biden administration's $3.5 trillion infrastructure plan and roll back some of the tax cuts passed by the Trump administration four years ago.
The bill would impose new limits on large individual retirement accounts, push through additional restrictions on corporate deductions for highly compensated employees and mandate new “wash sale” rules for people who own cryptocurrencies. The IRS currently prohibits investors who sell a security at a loss for tax purposes from repurchasing shares of the security—or one that is substantially identical to it—within 30 days (before or after) the sale.
Neal's proposal gives Democrats the green light to begin to solidify their plan for their coming "reconciliation" package—a dramatic expansion of the government’s safety nets.
One lawmaker not supporting Neal’s 26.5% corporate rate is Sen. Joe Manchin (D-W.V.), who said he prefers a 25%. The current rate is 21%.
On Friday, Neal revealed a separate plan for $1 trillion in tax cuts and other benefits Democrats also intend to include in their reconciliation package. Neal said he plans to move both through his committee this week.
House lawmakers are racing to pass their package by a self-imposed Sept. 15 deadline.