The House Ways and Means Committee advanced a slate of tax increases designed to fund Democrats’ multitrillion-dollar infrastructure and social welfare reconciliation package.
On a party-line vote Wednesday, the committee advanced the legislation after several days of discussion and failed Republican amendments. The total tax increases are forecast to raise more than $2 trillion.
“Our action today will have a titanic impact on tax fairness in the United States,” said Rep. Bill Pascrell, a New Jersey Democrat.
Democrats voted to raise the corporate tax rate to 26.5%, up from the current 21%. The proposal is less than the White House’s original offer to raise the rate up to 28%, but it’s higher than key Democratic Sen. Joe Manchin’s hope of a 25% rate.
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They also moved to increase the capital gains rate for high earners from 20% to 25%. When factoring in an existing Obamacare surtax on investment income, people making over $1 million would pay an effective rate of 28.8%.
Democrats also voted to raise the top marginal tax rate on individuals making over $400,000 per year to 39.6%, up from the current 37% rate. This would also apply to married couples filing jointly who earn over $450,000 annually.
Additionally, a new 3% surtax on people making more than $5 million was part of the legislation.
Notably, Democratic centrist Rep. Stephanie Murphy of Florida voted against the Ways and Means section of the legislation, which is set to become part of the larger spending package known as the Build Back Better Act. Murphy said she remains “optimistic that the comprehensive reconciliation package will be appropriately targeted and fiscally responsible.”
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The combination of proposed tax code changes will raise nearly $2.1 trillion, the nonpartisan Joint Committee on Taxation estimates. When tax breaks for housing, green energy, and other Democratic priorities are factored in, the Monday plan will generate $871 billion in net revenue.
