Tax Hikes in House Social Spending Bill Total $1.48 Trillion
Tax Hikes in House Version of Biden Plan Come to Nearly $1.48 Trillion, Panel Says
(Bloomberg) -- The House’s version of President Joe Biden’s signature social-spending bill raises nearly $1.48 trillion in new tax revenue, according to the Joint Committee on Taxation.
The plan also includes $24.8 billion for a fee on businesses that pollute, pushing the total of new revenue to roughly $1.5 trillion. Still, the money from tax increases on the wealthy and corporations falls short of the $1.75 trillion that Democrats say they want to spend on new social programs.
The estimates from Congress’s official tax scorekeeper are likely to be closely analyzed by centrist Democrats, including Senator Joe Manchin of West Virginia, to make sure that the cost of new spending is fully offset with new revenue. Biden has pledged that the bill won’t add to the deficit and Manchin has said that’s a crucial metric for him to support the legislation.
The estimate doesn’t include revenue from increasing Internal Revenue Service enforcement, which will be included in Congressional Budget Office projections later. The White House expects it can raise an additional $400 billion over a decade by giving the IRS $80 billion in additional funding to increase audits and improve taxpayer compliance. However, estimates from think tanks have projected roughly half that.
The JCT calculations also don’t include additional savings from a drug-pricing deal that would allow the federal government to negotiate prescription prices. The White House estimates that would generate about $250 billion in additional savings to offset the cost of the plan.
Fiscally conservative Democrats have said they want to see analyses of the bill’s costs from both the JCT and the CBO before proceeding with a vote on the tax and spending measure. Speaker Nancy Pelosi, who is attempting to bring the legislation to the House floor this week, can afford only three defections if all Republicans, as expected, vote against the bill.
House Ways and Means Chairman Richard Neal has said the package would be fully paid for with taxes and other offsets, though the comprehensive estimate of the bill’s total spending and revenue offsets from the CBO hasn’t yet been published.
Increasing the cap on state and local tax deductions to $72,500 from $10,000 would raise about $2 billion over the decade because the limit on the write-offs would be in place through 2031. The $10,000 cap is scheduled under current law to expire at the end of 2025, allowing for unlimited deductions beyond that.
However, the increase to the SALT cap amounts to a large tax cut for many relatively high-income households in the coming years. Taxpayers will get a roughly $222 billion tax cut through 2026, according to the JCT estimates.
The plan includes $300.5 billion in energy-related tax incentives, including electric vehicle tax credits and preferences for renewable energy.
The legislation increases taxes on corporations and other large businesses by nearly $814 billion over the decade. High-earners would pay $640.2 billion more in federal levies over the next 10 years, according to the estimates.
The 15% corporate minimum tax on financial profits is the single biggest new tax in the legislation, raising about $318.9 billion over the decade. Companies that report big profits to shareholders, but have lots of credits and deductions to reduce their IRS bills would be subject to that new tax.
The expansion of the 3.8% net investment income tax is the largest new tax provision affecting high net worth individuals. The bill would expand the scope of the levy so that it applies to business income from pass-through entities, such as partnerships and limited liability companies, raising about $252.1 billion over the next 10 years.
The House version of the legislation is still subject to negotiation even once it passes the lower chamber. Senators have said they want to revise some key issues in the bill, including the SALT deduction, immigration measures, and paid leave programs, which could impact the total cost and necessary offsets for the bill.
©2021 Bloomberg L.P.