Whose taxes are going up? White House considering 4 ways to pay for spending package
Democrats push to pass Biden's infrastructure package in the House by Oct. 31
Congressional lawmakers are still hammering out a deal on President Biden’s multitrillion-dollar spending package that would boost funding for infrastructure and clean energy, along with social spending initiatives.
The president said this week he has agreed to cut the mammoth $3.5 trillion price tag, and reports have suggested lawmakers will land somewhere between $1.75 trillion and $1.9 trillion.
But some Democratic legislators, like Sen. Kyrsten Sinema, D-Az., have said they will not agree to a package that includes tax hikes on corporations and high earners.
Here’s how the Biden administration has proposed paying for the package:
WHITE HOUSE INSISTS CORPORATE TAX HIKE STILL ON THE TABLE IN SPENDING BILL
Minimum corporate tax
Biden has advocated for enforcing a 15% minimum tax on corporations across the board, a move the administration has argued will ensure top companies do not skirt paying their "fair share."
"Some of the biggest corporations in America pay literally nothing in income taxes," press secretary Jen Psaki told reporters Friday. "Fifty-five of the biggest companies – they pay lower rates than wage-earning families. We can stop that by imposing a 15% minimum tax, a minimum corporate tax to make sure large corporations pay their fair share."
The original $3.5 trillion package included raising the corporate tax rate to 28%, but as the president said in a town hall event Wednesday, "It’s all about compromise."
"I’m a capitalist. I hope you can be a millionaire or a billionaire," he added. "But at least pay your fair share. Chip in a little bit."
Global minimum tax
Psaki said the president and lawmakers are looking at a global minimum tax to prevent companies from forgoing tax payments by utilizing offshore accounts.
"The president believes – [and] a number of other members of Congress believe – that we need to stop rewarding companies that offshore profits and American jobs," Psaki told reporters. "That will help to make the United States more competitive and end the race to the bottom."
The push for a global minimum tax rate comes as 136 nations agreed to enforce a 15% tax on corporations to make it harder for multinational corporations to skirt taxation.
Over 90% of the global economy, including the U.S., has agreed to target companies that evade tax liabilities in their country of origin by moving profits to low-tax countries, like the Cayman Islands and Bermuda – a practice that costs the U.S. tens of billions of dollars each year, according to the Treasury Department.
HOW WILL THE GLOBAL MINIMUM TAX RATE WORK?
Closing Medicare tax loopholes
"We can also close loopholes for high-income Americans, including a loophole that allows some taxpayers — like hedge fund managers — to escape a Medicare tax imposed on all high-end income," Psaki outlined Friday.
The press secretary was referring to hedge fund and private equity fund managers not being forced to pay Medicare payroll taxes each year.
The funds use a loophole to "pay a lower federal income tax rate on their compensation than ordinary working Americans," according to the National Women’s Law Center.
All income earners in the U.S. are subject to a 1.45 percent payroll tax for Medicare expenses, but capital gains are not subject to the same tax.
Hedge funds and private equity managers are able to reflect profits earned for their services as capital gains by taking the funds as "carried interest."
Capital gains requires a 15% tax on profits, which means the investment schemes avoid paying the full corporate income tax – which, under former President Trump, was lowered from 35% to 21%.
They also avoid paying Medicare tax altogether.
STATE AGS WARN OF CHALLENGE IF BIDEN BANK DATA COLLECTION PASSES
Cracking down on tax evasion with IRS bank account monitoring
Democrats have backed a proposal to require banks to report annually on any transaction that exceeds $10,000.
The move is an attempt to prevent tax evasion and would require financial institutions to hand over customer account information to the Internal Revenue Service.
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"We can crack down on wealthy tax cheats who are taking advantage of every honest taxpayer and invest in enforcement to stop 1% from evading $160 billion in taxes per year, something that Treasury secretaries — Republican and Democrats — have expressed support for and feel this is a strong part of the proposal," Psaki said.
But some conservatives have voiced concern over this proposal, saying it is an invasion of privacy.
On the four proposals in total, Republican Sen. Dan Sullivan of Alaska told Fox News' David Asman Saturday that the revenue will not be enough to pay for the new spending. Biden's claim that the bill will cost "zero" is "false," Sullivan said.
FOX Business' Megan Henney and Fred Lucas contributed to this report.