Jack Ablin, the chief investment officer at Cresset Capital, said his firm was consumed by helping clients plan for changes.
But the political realities -- and lobbying -- slowly chipped away at the package as Democratic leaders sought to win lawmakers’ support. The increases were intended to finance sweeping large-scale investment in climate initiatives, education, child care and housing.
What was initially envisioned as a $3.5 trillion tax increase in spring 2021 shrank to roughly $2 trillion by last fall. When talks resumed this summer, Democrats were discussing a package with no more than $1 trillion in new taxes -- with half of that going to new spending and half to reduce the deficit. The deal announced Wednesday has $451 billion in new taxes, plus $288 million in additional revenue from drug price savings.
Early in the negotiations some of most-feared proposals, including the changes to capital gains and step-up in basis, dropped out. Only more modest proposals to tax high earners and pass-through business income remained. Most Democrats see the Manchin deal as their only chance to pass any elements of Biden’s agenda.
The prospect of election losses this November aside, many Democrats are undeterred on pursuing a tax-the-rich strategy. They blame the failure to pass more of their tax plans on the select few moderates, and point to a solidification of support in their broader caucus for bolstering levies on the wealthy at a time of widening inequality.
Surprising Unity
Kim Clausing, a Treasury Department official until May, said she was surprised by how little disagreement there was within the Biden team over developing tax policies.
“I expected it to be somewhat more conflictual -- that there might be different subsets of the administration with different tax policy priorities that we’d have to fight about,” Clausing said at a recent event. But “having these tight margins in Congress do make these things difficult,” she said.
Ideas like taxing the wealthy and overhauling the investment-taxation system were talked about chiefly in super-progressive circles a few years ago. But now they are ingrained in the mainstream of the Democratic Party -- which progressives say is a win even if it doesn’t translate to immediate action.
“Democrats are now much more comfortable with taxes and seeing it as critical to their investment agenda,” said Frank Clemente, the executive director of the Americans for Tax Fairness, a group that advocates for higher taxes on the wealthy and corporations.
Representatives Don Beyer of Virginia and Steve Cohen of Tennessee just this week introduced legislation that would tax the unrealized gains of billionaires, following a Biden proposal from earlier this year.
That kind of continuing pressure leaves tax advisers wary about declaring a final victory over potential increases.
“Folks know that no impactful federal tax changes are likely for the next several years given the likely gains for Republicans in the midterms,” Aquilance’s Eyler said. But “if somehow the Democrats expand their Senate lead and keep the House, look for a mad scramble between Election Day and the end of the year” by the wealthy to prepare, he said.
This article was provided by Bloomberg News.