$3.5 Trillion Budget Remains Paused As House Democrats Release Tax Increase Details

On Sunday, during an interview with CNN, Senator Joe Manchin reaffirmed his position that he will not support the $3.5 budget plan. Meanwhile, House Democrats release the details on their proposed tax increases, aiming to raise over $2 trillion to pay for a majority of the proposed budget. Here are the details you need to know.

Senator Manchin Says 'No Way' To the $3.5 Trillion Budget

During CNN's State of the Union interview, Senator Manchin was asked again if he would support the $3.5 trillion budget, citing Senate Majority Leader Chuck Schumer's desire to move "full speed ahead." Senator Manchin responded, "he will not have my vote."

Senator Manchin reiterated the reasons why he will not vote for spending another $3.5 trillion. Among the reasons he cited are increased inflation, the unemployment rate compared to the millions of unfilled jobs, and the unknown financial costs that the pandemic or other matters could still inflict on the country.

Manchin also mentioned that Congress already spent $5.4 trillion on pandemic relief, some of which remains unspent and will continue in 2022. When asked about the House voting on the budget on September 27, Senator Manchin stated, "There's no way we can get this done by the 27th if we do our job."

Others are expressing their discontent over Manchin's decision. Senator Sanders from Vermont, one of the authors of the bill, commented on Manchin's apprehension by saying it was "not acceptable." However, Senators Kyrsten Sinema and Mark Warner have also expressed their hesitancy with the budget.

When asked about paying for the budget plan, Manchin approved of higher corporation taxes. "I want to increase taxes on corporations, I've spoken to corporations, I want the wealthy to pay their fair share," Manchin stated.

House Reveals their Tax Increase Details

Monday, House Democrats released the details of their proposed tax increases, aimed at funding a large part of the $3.5 trillion budget plan. Their plan includes higher tax rates on corporations, high-income business owners, and investors. Here is a brief breakdown of their tax increase proposal:

• Corporate Tax Increase. The plan would raise the top corporate tax rate from 21% to 26.5%. Corporations making up to $400K annually would face an 18% tax, for corporations making up to $5 million it would be 21%, and any corporation making more than $5 would face the 26.5% tax.
• Hi-Income Tax Increase. The top income bracket, which starts at $400K for individuals and $450K for married couples, would increase from 37% to 39.6%. There would be an additional 3 percent point surtax on any individual or couple making more than $5 million.
• Capital Gains Increase. Capital gains and dividends tax rate would increase from 20% to 25%. Taking into consideration the current 3.8% investment-income tax and the new surtax on high-income individuals, the capital gains tax could be as high as 31.8% for certain individuals.
• International Tax Increase. Companies who have international income would be taxed at a higher rate of 16.6%, rather than the current 10%. To ease the impact of the increase, corporations would be allowed to exclude 5% of their foreign tangible assets from their tax burden.
• Miscellaneous Tax Changes. Aside from increasing taxes, the proposal would also end estate-tax exemptions this December, rather than in 2025 as it currently stands. It would also prevent contributions to tax-preferred retirement plans totaling $10 million or more, as well as other changes.

With all of these changes, Democrats plan to raise over $2 trillion over the next 10 years. Additionally, lawmakers hope that $700 billion will be saved via decreased prescription drug prices, and hope that the economy will grow enough to create $600 billion in budgetary savings. They plan on voting on these proposals this week.

Business Groups Object to the Tax Increases

Several business groups raised their displeasure over the new tax increases on Monday. Chief policy officer at the U.S. Chamber of Commerce, Neil Bradley, referred to these changes as an existential threat to U.S. prosperity and claimed that the "tax reforms will slam the brakes on hiring and wage increases."

Karen Kerrigan, president of the Small Business & Entrepreneurship Council, stated “The foundation is established for a great economic recovery and bounce back to pre-pandemic levels, but toying with tax rates at a time like this has a dampening effect."

Conclusion

House Democrats are proposing tax increases that they believe would cover most of the cost of the $3.5 trillion budget. Meanwhile, businesses are pushing back in the face of higher taxes. Senate Democrats still face an uphill battle with Senator Joe Manchin, and possibly others, firmly standing against the budget plan.

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