Democratic senators pressure Biden to cut some taxes for rich people in infrastructure bill

Blue-state lawmakers are pressuring President Biden to cut some taxes — while he raises others — in the horse-trading for his next big package.Why it matters: The cold math suggests Biden will be forced to sacrifice the size of his infrastructure ambitions or embrace even more deficit spending — and convince Congress to go along.Stay on top of the latest market trends and economic insights with Axios Markets. Subscribe for freeDriving the news: Democrats, including Senate Majority Leader Chuck Schumer (D-N.Y.), are pressing the White House to repeal the $10,000 limit for deducting state and local taxes — the so-called SALT cap — from their federal tax bill.Removing the limit — imposed by President Trump’s 2017 tax reforms — would cost about $88.7 billion a year, according to the Joint Committee on Taxation.Repealing the cap is deeply unpopular with progressives, who argue doing so would favor the rich.But many voters in high-tax (and Democratic) states — like New York, New Jersey, Connecticut, Maryland and California — hate the limit. The provision is scheduled to expire at the end of 2026.The big picture: The White House has been reluctant to put a price tag on its infrastructure plans, but Democrats close to the administration say it will likely be $1 trillion to $2 trillion.Some Democrats, including Sen. Joe Manchin (D-W.Va.), are demanding the president find new revenue to pay for at least part of the package.Biden himself has never been crystal clear about what new spending needed to be offset with new taxes, and gave himself an out during the 2020 campaign by maintaining “one-time” spending didn’t require tax increases.He never defined what that means and essentially stopped talking about it after he secured the nomination.He also didn’t include it in any of his “Build Back Better” tax and infrastructure proposal. Go deeper: During the campaign, Biden proposed policies that would raise about $3 trillion in new revenue, according to the Penn Wharton Budget Model.But Democrats close to the White House think new revenue will probably be a total of less than $1 trillion, with the easiest changes on the corporate, capital gains and personal side.By the numbers: Manchin told Axios he would support the corporate tax rate increasing from 21% to 25%, which could yield $400 billion to $500 billion in new revenue over 10 years.Returning the top personal rate to the pre-Trump 39.6% would bring in another $153 billion.Taxing capital gains as ordinary income — which would eliminate the so-called “carried interest” loophole for private equity — adds another $178 billion.The bottom line: The amount of new revenue Biden could raise night not exceed the amount of lost revenue from a full repeal of the SALT cap.More from Axios: Sign up to get the latest market trends with Axios Markets. Subscribe for free

Source link