House Democrats Release Tax Increases to Fund Reconciliation

The House Ways and Means Committee began meeting last week to consider the committee’s provisions in the reconciliation package. The committee will consider legislation relating to a wide-ranging array of policies, including paid leave, retirement, child care, trade adjustment, health care, expanding Medicare, infrastructure financing and tax revenue proposals. On Monday, House Democrats released the framework for their tax plan. The plan includes:

• Changes to the corporate tax structure from a flat rate of 21% to a graduated corporate rate of 18% on the first $400,000, after which companies would pay 21%. Companies earning more than $5 million annually would pay a top corporate rate of 26.5%.
• Increases the top individual tax rate to 39.6% from 37% and the legislation would impose a 3% surtax on incomes above $5 million
• Increases capital gains rate to 25%
• Repeal of the doubling of the estate tax threshold, reverting from $11.7 million to pre-2017 level of $5 million
• Additional funding for IRS to increase audits on companies and wealthy individuals

Thanks in large part to the opposition the Family Business Council and the Family Business Estate Tax Council, consisting of NRMCA and a broad coalition of business groups, the president’s proposal to end step-up in basis for estates was not included in the legislation. Similarly, floated changes to 1031 exchange rules were not included in the tax package.

Left outstanding was the thorny issue of the restoration of the state and local tax (SALT) exemption which was capped in the Tax Cut and Jobs Act and has been a priority of Members of Congress from both parties – while getting an uneasy reaction from progressives. Reps. Tom Suozzi (D-NY) and Jared Gottheimer (D-NJ) have pledged to oppose any tax package that does not include a repeal of the SALT cap. As of Tuesday, it was reported that the SALT issue would get a “meaningful” fix, though there was no clarity on what that might be.

You can find summaries of the policies here.The politics of reconciliation make it unclear whether the House – let alone the Senate – can pass the package under consideration. Regardless of what the House passes, the Senate is all but guaranteed to significantly pare down the tax and spending package.

For more information, contact Andrew Tyrrell at atyrrell@nrmca.org.