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Biden pledge to tax wealthy, companies revived with Manchin-led bill

Stock Markets Jul 29, 2022 12:00AM ET
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2/2 © Reuters. FILE PHOTO: Chairman U.S. Senator Joe Manchin (D-WV) attends a U.S. Senate Energy and Natural Resources Committee hearing on Capitol Hill in Washington, U.S., July 19, 2022. REUTERS/Elizabeth Frantz/File Photo 2/2

By Steve Holland

WASHINGTON (Reuters) -U.S. President Joe Biden's campaign trail promise to increase taxes on corporations and the wealthy as part of a battle against glaring income inequality in the United States got an unexpected boost on Wednesday.

Early proposals to increase tax rates from Biden and his fellow Democrats hit a brick wall in Congress after Republicans -- and some Democrats -- opposed them. But a sudden reversal by West Virginia Democratic Senator Joe Manchin, a swing vote in the divided Senate, has given Biden's tax agenda a new lease on life.

The amount U.S. companies contribute to tax revenue that funds roads and schools has plummeted https://graphics.reuters.com/USA-BIDEN/INVESTMENTS/xlbvgkbxlvq since the 1940s.

Biden has often said in office that companies should instead pay a "fair share," a contrast to deference to private markets begun by Republicans with former President Ronald Reagan's election in 1980, and buoyed by rounds of tax cuts and deregulation, by both parties.

The new compromise bill includes $430 billion in new spending on energy, electric vehicle tax credits and health insurance investments. It more than pays for itself by raising minimum taxes for big companies and enforcing existing tax laws, Manchin and Senate Majority Leader Chuck Schumer said in a statement.

Biden said during a speech on Thursday that the deal would "for the first time in a long time begin to restore fairness to the tax code - begin to restore fairness by making the largest corporations in America pay their fair share without any new taxes on people making under $400,000 a year."

The bill would impose a 15% minimum tax on corporations with profits over $1 billion, raising $313 billion over a decade, they wrote. Companies could claim net operating losses and tax credits against the 15%.

The U.S. corporate tax rate dropped to 21% from 35% after a 2017 tax cut pushed by then-President Donald Trump and his fellow Republicans, but many companies pay much less than that, and some of the largest pay no federal taxes, research groups including the Institute on Taxation and Economic Policy have found.

Biden proposed raising that rate to 28% last year as part of an infrastructure spending bill, but the tax component was struck from the bill.

The new Manchin-Schumer bill also aims to close the so-called carried interest loophole, long a goal of Democrats.

Carried interest refers to a longstanding Wall Street tax break that let many private equity and hedge fund financiers pay the lower capital gains tax rate on much of their income, instead of the higher income tax rate paid by wage earners.

Eliminating the loophole would raise $14 billion, the senators say.

Schumer said he expected the Senate to vote on the legislation next week, to "lower prescription drug prices, tackle the climate crisis with urgency and vigor, ensure the wealthiest corporations and individuals pay their fair share in taxes, and reduce the deficit."

The Manchin-Schumer measure is substantially smaller than the multitrillion-dollar spending bill Democrats had envisioned last year.

But it still represents a major advance for Biden's policy agenda ahead of midterm elections on Nov. 8 that could determine whether Democrats retain control of Congress.

It came just as Biden celebrated Senate passage of a bill aimed at boosting the U.S. semiconductor industry, another key priority of his administration, and as he struggles with low job approval ratings and ebbing support from his own party after a series of conservative Supreme Court rulings.

"This bill will reduce the deficit beyond the record-setting $1.7 trillion in deficit reduction we have already achieved this year, which will help fight inflation as well," Biden said in a statement.

"And we will pay for all of this by requiring big corporations to pay their fair share of taxes, with no tax increases at all for families making under $400,000 a year," he said.

Biden pledge to tax wealthy, companies revived with Manchin-led bill
 

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Comments (6)
Samantha
Samantha Jul 29, 2022 1:31AM ET
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Agriculture, oil and gas, pharmaceuticals, airlines, and other major industries are all subsidized. Republicans do not object to this. They only object  to infrastructure, development of manufacturing in the U.S., and preparedness for the future. They are obsessed with China conspiracies and support tax schemes that inflate the national deficit and dependency on China. How come?
Jimmy Doodoo
JimmyD Jul 29, 2022 12:22AM ET
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Corporations don't pay taxes, we end up with the bill. This is just more propaganda by the Tax and Spenders.
Michael McDonough
Michael McDonough Jul 28, 2022 7:31PM ET
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Why would anyone trust anything said or promised by Shumer/Biden/Sanders ?
James Pattison
James Pattison Jul 28, 2022 3:53PM ET
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Except the fact the democrat congress just wrote a tax payer check to one of the largest sectors flush with cash with the chip bill…
nick cage
nick cage Jul 28, 2022 3:50PM ET
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Stop with the 400k lie. its 400k a family. so doctor and a school teacher will be hit. This is a marriage tax.
Casador Del Oso
Casador Del Oso Jul 28, 2022 3:41PM ET
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Raising taxes during a recession is a great way to cause demand destruction.
 
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