Biden pledges to tax the rich, businesses revived with Manchin-led bill

WASHINGTON, July 28 (Reuters) – US President Joe Biden’s campaign promise to raise taxes on corporations and the wealthy as part of a fight against blatant income inequality in the United States received an unexpected boost on Wednesday.

Early proposals to raise the tax rates of Biden and his fellow Democrats hit a brick wall in Congress after Republicans — and some Democrats — opposed them. But a sudden turnaround by Democratic Senator Joe Manchin of West Virginia, a vote in the divided Senate, has revived Biden’s tax agenda.

The amount US companies contribute to tax revenues that fund roads and schools has fallen sharply since the 1940s.

Biden has often said during his tenure that companies should pay a “fair share” instead, as opposed to respect for private markets begun by Republicans with the election of former President Ronald Reagan in 1980, and buoyed by tax cuts and tax cuts. deregulation by both parties.

The new compromise law includes $430 billion in new spending on energy, tax credits for electric vehicles and investments in health insurance. It more than pays for itself by raising minimum taxes for large companies and enforcing existing tax laws, Manchin and Senate Leader Chuck Schumer said in a statement.

Biden said in a speech Thursday that the deal “would restore fairness to tax law for the first time in a long time — restore fairness by letting America’s largest corporations pay their fair share without new taxes on people earning less than $400,000 a year.”

The bill would impose a 15% minimum tax on companies with profits exceeding $1 billion, bringing in $313 billion in a decade, they wrote. Companies could claim net operating losses and tax credits at 15%.

The U.S. corporate tax rate fell from 35% to 21% after a tax cut in 2017 by then-President Donald Trump and his fellow Republicans, but many companies pay far less than that, and some of the largest pay no federal taxes, research groups including the Institute for Taxation and Economic Policy.

Biden suggested raising that rate to 28% last year as part of an infrastructure spending bill, but the tax component was removed from the bill.

The new Manchin-Schumer bill also aims to close the so-called carry-interest loophole, long a goal of Democrats.

Carried interest refers to a long-standing Wall Street tax benefit that causes many private equity and hedge fund financiers to pay the lower capital gains tax rate on much of their income, rather than the higher income tax rate paid by wage earners.

Removing the loophole would bring in $14 billion, the senators say.

Schumer said he expected the Senate to vote on the legislation next week, “to lower prescription drug prices, tackle the climate crisis with urgency and strength, ensure the richest companies and individuals get their fair share of pay taxes and reduce the deficit.”

The Manchin-Schumer measure is significantly smaller than the billion-dollar bill that Democrats had in mind last year.

But it still represents major advances for Biden’s policy agenda ahead of the Nov. 8 midterm elections, which could determine whether Democrats retain control of Congress.

It came just as Biden celebrated the Senate approval of a bill aimed at boosting the U.S. semiconductor industry, another key priority of his administration, and as he grapples with low job ratings and the ebbing of the support from his own party after a series of conservative Supreme Court rulings. .

“This bill will push the deficit above the record $1.7 trillion deficit reduction we’ve already achieved this year, which will also help fight inflation,” Biden said in a statement.

“And we will pay for all of this by requiring large corporations to pay their fair share of taxes, with no tax increases for families earning less than $400,000 a year,” he said.

Reporting by Steve Holland; Editing by Heather Timmons and Mark Porter

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