Orignally published on 2021-10-26 23:04:42 by www.politico.com
At the same time, they’re dropping long-standing plans to roll back former President Donald Trump’s cut in the corporate tax rate — something many Democrats had been eager to campaign on. That left lawmakers hurrying to find a substitute, which they unveiled Tuesday: a complicated new corporate minimum tax plan aimed at preventing companies from erasing their tax bills.
And there are major questions over how much money another proposal, to begin taxing stock buybacks by big corporations, will raise — if the government starts taxing companies on buybacks, many businesses will surely find other ways to spend their money.
Democrats are now working through those details while beating back complaints by Neal (D-Mass.) and others that lawmakers don’t have time to vet the complex proposals.
Sen. Ron Wyden (D-Ore.) rejects that assertion.
“I’ve been working my proposal to tax billionaires for two years — thousands of hours have been spent on it,” he said. “We’ve vetted it with outside experts, some of the best tax attorneys in the country. We’ve worked with the White House and the Treasury Department.
“Anyone who tells you this is something new is wrong.”
The problem for Neal and others wary of the proposals is that, with time running short, many lawmakers are becoming more interested in reaching a deal than debating all of its specifics.
The big loser here, potentially, is Neal.
He spent months developing his tax plan — the only one that’s been fully fleshed out, that has passed muster with congressional scorekeepers and that was approved by a committee. He had been reluctant to put out a plan in the first place, without knowing what the Senate would ultimately be willing to accept, fearful of asking colleagues to vote for unpopular tax increases that end up going nowhere.
But now he is threatened with the prospect of much of his plan being thrown overboard because Sinema is more willing than he is to threaten the Democrats’ top legislative priority — though Neal is not giving up the fight, predicting his colleagues will come back around to his plan.
“The only thing I’m going to concede on tax is that our plan looks better every day,” he told reporters Monday evening, emphasizing the uncertainties surrounding a billionaires tax.
“In the end here, efficiency, predictability are going to gain some traction.”
Until recently, Sinema didn’t appear to have much interest in the tax issues. She hasn’t explained much of her thinking, rarely speaking with reporters, which has left people guessing about her motivations.
“Simply raising tax rates will not in any way address the challenge of tax avoidance or improve economic competitiveness,” her spokesperson said in a statement Friday. She has been “engaged for months in substantive, nuanced policy negotiations and is well-versed in the range of current tax proposals being considered.”
But all of the tax hikes Democrats are considering in lieu of Neal’s proposals come with big open questions.
Wyden released an outline of the billionaire tax proposal last week, which would require people with more than $1 billion in wealth or who earn more than $100 million for three consecutive years to pay taxes each year on the appreciation of assets they hold, even if they don’t sell them.
But there are lots of implementation questions, such as how it would deal with hard-to-value assets and how the IRS will administer it. Said Sen. Mark Warner (D-Va.): “This is the ultimate ‘where the devil’s in the details.’”
And Neal is trying to rally opposition in the House to the proposal. On Tuesday, Majority Whip Jim Clyburn (D-S.C.) echoed Neal’s concerns, telling MSNBC: “There is a very difficult path to try to get that done.”
Hanging over the plan is the question of whether a tax just targeting billionaires is even allowed.
The Constitution restricts so-called direct taxes, an antiquated term referring to levies imposed directly on someone that can’t be passed onto someone else. There’s a big exception for income taxes, thanks to the 16th Amendment, which allows Congress to tax earnings. The billionaires tax is certain to be challenged in court where the question will be whether it counts as an income tax.
Critics ask why Democrats are sidelining more proven methods of raising taxes for one that could end up being struck down.
“Why gamble?” said Steve Rosenthal, a senior fellow at the Tax Policy Center. “Democrats have so many great ways to raise taxes on the rich — why go down a path that’s suspect constitutionally?”
The Finance Committee expresses confidence the plan will survive court scrutiny, saying its staff has consulted with a range of experts while noting there are similar examples of what experts call “mark to market” rules in the tax code dealing with arcane financial assets.
The debate over the billionaires tax has obscured the scramble by Wyden’s panel to develop a new corporate minimum tax lawmakers could swap in for the corporate tax rate, which had been expected to bring in around a half-trillion dollars.
The committee considered a variety of options before revealing Tuesday that it had settled on a 15 percent “book income” minimum tax similar to ones proposed by Sen. Elizabeth Warren (D-Mass.) and President Joe Biden.
It’s aimed at firms like Amazon that report big profits to Wall Street while appearing to pay little or nothing to the IRS.
Congress has tried something like it before, back in the 1980s, and some experts warn it could have unintended consequences, hitting companies no one would confuse for Amazon.
In a statement, Sinema praised the plan. “This proposal represents a commonsense step towards ensuring that highly profitable corporations — which sometimes can avoid the current corporate tax rate — pay a reasonable minimum corporate tax on their profits, just as everyday Arizonans and Arizona small businesses do,” she said.
An official estimate of how much it would raise is not yet available, though Democrats hope it will generate hundreds of billions of dollars.
Perhaps nowhere will Democrats be at the mercy of congressional scorekeepers, though, like they will be with a proposal to begin taxing companies that buy back their stock.
Democrats were incensed by the tidal wave of corporate stock buybacks that followed Republicans’ 2017 tax cuts, believing more of that money should have gone to workers. Some Democrats have proposed a 2 percent tax on publicly traded companies repurchasing stock, which they hope can raise $100 billion.
But the official Joint Committee on Taxation, the nonpartisan office charged with putting price tags on lawmakers’ tax plans, will surely assume companies will buy back less stock if it’s taxed. Corporations with extra cash could instead dole out more dividends, for example, which are taxable to the person receiving them but not to the company.
“I don’t see much revenue being there,” said John Buckley, a former top Democratic tax aide and onetime head of the Joint Committee on Taxation. “If the tax on stock buybacks is significant, then people won’t do it. And if it’s not significant, people will do it but then you don’t raise much money.”
And if the proposals backed by Sinema won’t raise the kind of cash Democrats are expecting, they may find themselves returning to Neal’s proposal to fill in the gaps.