By Robert Stewart
Congress is currently crafting a package that would invest trillions of dollars in working-family services and climate- change response, all paid for with fairer taxes on the rich and corporations. This is a companion to another bill that would put about a trillion dollars into fixing the nation’s ailing physical infrastructure, like roads, bridges, rail lines, airports and more. We all know investments in both “hard” and “soft” infrastructure are long overdue, but Congress is struggling to set the price tag of these investments. Bernie Sanders, chair of the Senate Budget Committee, initially advocated for a $6 trillion social-spending plan. After a series of negotiations, the legislative package was trimmed to reflect President Biden’s “Build Back Better” (BBB) plan, priced at $3.5 trillion over a ten-year period.
And now it looks like due to objections from a handful of moderate members, the package could end up with an even smaller price tag. Since we’re talking about big numbers here, it’s important to remember that President Trump along with the Republican majority in both Houses of Congress enacted a massive tax-cut bill in his first year in office—the sweeping legislation will eventually cost $1.9 trillion in lost revenue and mainly benefits ultra-wealthy and corporations. Moreover, the pandemic has exacerbated economic inequality and highlighted the importance of public investments to help working families get by and get ahead.
This backdrop is why this plan is so needed. The Build Back Better package makes investments in universal childcare, affordable healthcare, quality education, fair housing, and policies to alleviate poverty. It would also take meaningful steps to confront planet-threatening climate change. These policies are what President Biden and Democrats in Congress ran and won on last year.
Many of the tax proposals by President Biden would undo the harmful effects of the 2017 Republican tax law. The Ways and Means package that pays for Build Back Better plan is good, but it waters down these reforms. For example, the president’s plan would raise the corporate tax rate to 28%, up from its current rate of 21%. But the Ways and Means plan would raise the corporate tax rate only to 26.5%. The GILTI (global intangible low-taxed income) rate which gives multinational corporations preferential tax treatment on their foreign income would be raised from 10.50% to 21% under President Biden’s plan. Yet under the Ways and Means plan, the GILTI rate would rise to only 16.50%.
Additionally, the Ways and Means committee proposal fails to close tax loopholes that benefit wealthy families, who are disproportionately white. For example, it leaves open the Billionaires Loophole known as “stepped-up basis” that allows the wealthy to avoid taxes on a lifetime of capital gains from assets that accumulate significantly in value over time, like stock and real estate. The Ways and Means bill would raise the capital gains top tax rate to only 25% as opposed to the 39.6% proposed by President Biden, although the committee’s proposal would apply that rate starting at a lower income: $400,000 vs. $1 million in Biden’s plan. Both reforms begin to address perhaps that most egregious injustice in tax policy: the wealthy pay a top tax rate of only 20% on millions or even billions of dollars of unearned income, compared to the top rate of 37% on earned wages.
As Congress continues to grapple with the endgame for Build Back Better they still have time to improve the tax components that pay for the package. There are opportunities for Congress to do things like strengthen the Ways and Means tax proposals by including a Billionaires Income Tax (BIT), (proposed by Senator Wyden), which would tax all of the investment income of the nation’s roughly 700 richest individuals. Without the BIT, tax reform might not even touch the demographic that saw their wealth increase by 70% during the mass economic suffering of the pandemic.
Senior White House Economic Advisor Jared Bernstein recently went on record about the aggressive tactics that corporate tax lobbyists employ doing the bidding of the wealthy. We need Congress to stand for the American people and make Build Back Better as strong and progressive as possible. We ask you to join that fight by writing a letter to the editor of your local newspaper and letting your senator and representative know that you support President Biden’s plan of paying for the new working-family investments in Build Back Better with fairer taxes on taxes on the wealthy and corporations. Let your voice by heard by telling Congress not to shortchange investments the American people need.