Sens. Elizabeth Warren and Bernie Sanders.
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House Democrats’ plan to tax the rich isn’t quite the wealth tax progressives have long championed.
The 3% surcharge proposed Monday affects income and investment gains, not net worth.
A wealth tax is “the simple way” to level the playing field and pay for infrastructure, Sen. Bernie Sanders said.
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House Democrats are targeting the wealthy to pay for their massive infrastructure package. Americans itching to tax the rich shouldn’t get too excited.
On Monday, House Democrats unveiled a plan that would raise $2.9 trillion in revenue for their massive social spending bill, largely by raising taxes on the wealthiest Americans and corporations.
They plan to accomplish this by imposing a 3% additional tax on individuals with incomes over $5 million, a corporate tax hike to 26.5% and a capital gains tax increase, which covers assets from profits of stocks and bonds, to 25%.
But this plan doesn’t square with the wealth tax proposal progressives and much of the American public want.
“The wealth tax is not something that a bunch of politicians sit around and think, ‘Great idea,’ Senator Elizabeth Warren told reporters on Tuesday. “It’s something that the American people say we need for basic fairness.”
The big difference lies in how Democrats plan to tax income, instead of net worth
While the 3% surcharge (an additional tax on top of a current bracket) may appear to be the wealth tax that Massachusetts Sen. Elizabeth Warren has championed, there are key differences that suggest it may not go as far as some Democrats want in ensuring the wealthy pay their fair share.
Here’s why: Democrats propose only taxing income and investment gains. This allows the wealthy to park cash in other assets like stocks and bonds- which is part of a household’s net worth that Warren has proposed to tax.
“It’s like adding another bracket that’s 3 percentage points higher than the top rate that it’s proposed that they’d pay,” Frank Clemente, executive director at the left-leaning advocacy group Americans for Tax Fairness, told Insider of the Democrats’ plan.
Should House Democrats’ framework win approval, the surcharge would lift the capital-gains tax rate to 28% and boost the top income tax rate to 42.6% for Americans earning more than $5 million.
Warren’s ultramillionaire tax, on the other hand, would place a 2% tax on household net worth between $50 million and $1 billion, and a 3% tax on household net worth over $1 billion. This is “the simple way” to have billionaires pay more, Vermont Sen. Bernie Sanders told reporters on Tuesday. It’s also policy that lawmakers were drafting years before the Biden administration pushed for a multitrillion-dollar infrastructure package.
According to an analysis that economists Emmanuel Saez and Gabriel Zucman of the University of California at Berkeley sent to Warren, would raise at least $3 trillion in revenue over ten years.
The wealth tax is popular – but not with all Democrats
Despite House Democrats’ tax proposals being more modest than what …read more
Source:: Business Insider