Gone are ambitious proposals to begin taxing the unrealized capital gains of the uber rich or at least hit them with new surtaxes. Also out is the Treasury Department’s top priority: Tax increases on big corporations needed to bring the U.S. into compliance with a global tax deal.
Out of more than 40 tax increases Democrats had seriously considered, the plan includes just two, according to a summary provided by Manchin’s office — one imposing a new type of minimum tax on big companies, and a plan to squeeze the so-called carried interest loophole, something Democrats have been trying to eliminate for years.
While the fine print has yet to be shared, here are three things to know about the tax agreement:
NEW MINIMUM TAX ON BIG BIZ: The proposal would create a new 15 percent minimum tax on big corporations. Details are still sketchy, but it’s aimed at companies that report big profits to Wall Street but appear to pay little or nothing to the IRS.
This proposal has taken a lot of fire from tax experts who view it more as a soundbite for politicians than a serious tax proposal. They say there are legitimate reasons why companies would tell investors one thing and the IRS another, not least of which is companies are required to use different accounting rules when reporting to the Securities and Exchange Commission and to the IRS.
CARRIED INTEREST: Democrats have been trying to close the so-called carried interest loophole for more than a decade but had been stymied by Wall Street lobbyists and, ironically, Schumer (D-N.Y.).
The much-criticized provision allows private equity firms and other money managers to treat part of their earnings as capital gains, which are subject to a top rate of 20 percent, instead of much higher ordinary income tax rates.
BOOSTING TAX ENFORCEMENT: Increasing funding for the IRS is meant to bring in money to the federal treasury by giving the agency more muscle to go after unpaid taxes. Exactly how much more is subject to debate, and Democrats got into some big fights with Congress’s official scorekeepers over how much additional revenue they could book.
Manchin’s summary says they’re counting $124 billion in savings, though it’s unclear whether that’s net of their increase in the IRS’s budget, and a Manchin spokesman did not clarify. Regardless, it would be a fraction of the $400 billion the Biden administration had hoped to raise from increasing audits.