The wrath of progressive Washington descends once again on Democratic Sen. Joe Manchin as he questions the wisdom of the huge tax hike Senate Majority Leader Chuck Schumer wants him to sign onto. The West Virginian hasn’t ruled out a deal on ObamaCare subsidies and drug prices, but he seems frowning at a huge tax hike for small business and middle-class Americans in a slowing economy.
We suspect that many Democrats are secretly excited as they approach a fateful meeting with voters in November. You just won’t say it out loud like Mr. Manchin does. But if you’re looking for more reasons not to commit political hara-kiri, you can consult two new reports from Congress’ Joint Committee on Taxation (JCT).
Republicans asked the committee to estimate the federal tax impact of the House’s Build Back Better billing provisions excluding social spending (such as the Affordable Care Act premium and child tax credits). The bill also increases state and local tax deduction limits from $10,000 today to $80,000. This is pretty much the tax deal Mr. Schumer is trying to sell as part of Build Back Lighter.
The JCT analyzes include various green energy tax credits as well as tax increases such as a 15% minimum tax on corporate book revenues over $1 billion; 5% surcharge on income over US$10 million and 8% over US$25 million; 1% surcharge on corporate share buybacks; 3.8% “Net Capital Gains Tax” on pass-through income over $400,000; and limiting the losses that small businesses can deduct from their taxes.
According to JCT’s initial report, taxpayers would pay $31 billion more in federal taxes next year and $150 billion more in 2031 as tax increases are phased in and some green energy tax credits expire. Taxpayers across the income spectrum would be affected.
In 2023, those earning between $50,000 and $100,000 would pay $5.2 billion more. Over the 10-year budget window, about 30% of revenue would come from Americans earning less than $400,000 a year. JCT’s second analysis shows that more than a quarter of Americans earning between $75,000 and $100,000 would pay more taxes next year, as would more than half of Americans earning between $100,000 and $200,000.
The tax hike would be a few hundred dollars for many, but some could pay thousands of dollars more. Didn’t President Biden promise not to tax Americans earning less than $400,000? Read between his lips.
JCT expects workers to bear some of the higher corporate taxes, although it doesn’t disclose its methodology. Some Americans, particularly high earners, will benefit from green energy subsidies. But those benefits are being wiped out for almost everyone by the tax hikes.
Nearly 200 business groups wrote a letter to congressional leaders on Monday warning that the 3.8 percent net investment tax on pass-through income and the loss-deductible limit will cost small sole proprietorship and family businesses more than $400 billion over 10 years would . They also uncovered the farce that the net investment tax would support Medicare.
Democrats say the net investment tax will close a loophole in the Medicare tax. This is misleading. Democrats originally introduced the tax in 2010 as part of ObamaCare and applied it only to capital gains. But they didn’t specifically allocate the revenue to the Medicare Hospital Insurance Trust Fund because doing so would have violated Senate voting procedures, which bypass the 60-vote filibuster rule.
Instead, Democrats used the new Medicare surcharge to pay ObamaCare, claiming they would protect Medicare even as they tried to end the Medicare Advantage program. Now Mr. Schumer is trying to persuade Mr. Manchin that his tax and spending bill will protect Medicare, reduce the deficit and—funnily enough—bail out the fossil-fuel industry the Democrats are trying to kill.
Green energy tax credits will accelerate the destruction of fossil fuels and make the power grid less reliable. Inflation was 9.1% in June. Far from curing inflation, Mr. Schumer’s tax hikes will hamper the business investment needed to increase supply, while pro-green energy generosity encourages higher energy prices. This is a Build Back Poorer plan and Mr Manchin is doing his party and the country a favor by walking away.
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https://www.wsj.com/articles/joe-manchins-tax-message-to-democrats-chuck-schumer-joint-committee-on-taxation-congress-build-back-better-bill-11657835900 Manchin’s Tax Message to Democrats