To Fund The $3.5 Trillion Budget Plan, Democrats Aim To Undo Trump Tax Cuts
NOEL KING, HOST:
Democrats in Congress are moving ahead with President Biden's spending plan. It includes up to $3.5 trillion for new programs, mostly aimed at helping lower income Americans. They plan to finish work today on a long list of new tax increases to make that spending possible. NPR's congressional correspondent Kelsey Snell has been looking into this story. Good morning, Kelsey.
KELSEY SNELL, BYLINE: Good morning.
KING: What are Democrats proposing re taxes?
SNELL: So Democrats say they can raise at least $2 trillion and as much as $3 trillion with this plan. You know, the big-ticket items are increases to the top corporate and individual rates. You know, basically, they're trying to roll back the tax cuts Republicans passed under President Trump in 2017.
KING: OK, let's parse those two out. What would this mean for taxes on individuals?
SNELL: Yeah. On the individual side, Democrats promised voters that they'd undo taxes for the wealthy, and this is really their moment to do that. They want to return the top tax rate to 39.6 for individuals earning over $400,000. They also want to increase the rate high-income people pay for selling things like stocks and other assets. It's called the capital gains rate, and they want to make the top rate for that 25%, which is a pretty big hike.
KING: And what would it mean for businesses?
SNELL: Their plan would increase the top corporate tax rate from 21% to 26.5%. Now, that is not a full reversal of the tax cuts Republicans passed, and it's lower than what Biden proposed. They also plan to include changes to the rules for pass-through businesses. Now, sometimes that includes doctors and lawyers, but it basically means that someone reports a business income on their individual taxes, and they want to make it harder for companies to avoid the new higher taxes.
KING: How are Republicans responding to these proposals?
SNELL: Well, Republicans say that the bill will actually have some pretty harmful effects on the economy, mostly by making the U.S. an unattractive place to run a company. And they say it would penalize companies that would normally use the money they'd have to pay in new taxes to reinvest in their businesses. Here's what Kevin Brady, who's the top Republican on the tax writing committee, had to say.
(SOUNDBITE OF ARCHIVED RECORDING)
KEVIN BRADY: And those burdens land on their workers, lands on their customers, lands on the retirees whose retirement depends upon their success, and it lands on the communities that they live in.
SNELL: You know, Republicans also say that more federal spending will only drive up inflation and drive up the cost of goods that people are seeing, you know, getting more expensive across the country. They also reject Democrats' claims that these changes will only impact the wealthy and big businesses. They say farmers and small business owners in particular are at risk of seeing their taxes go up.
KING: Hey, you remember when raising taxes used to be, like, a complete nonstarter for any politician? It didn't matter the party. What changed?
SNELL: Yes. Well, you know, this is really a sign of how much progressives like Bernie Sanders have shifted the way Democrats talk about their ideas. They are explicitly embracing the message that they are trying to redistribute wealth and address inequality in the country. Now, many of the programs they're proposing aren't new, but the fact that they are explicitly talking about this as redistribution is new.
You know, a couple of things are happening here. One is that Democrats are trying to pass virtually all of President Biden's domestic agenda right now. And they also believe in the effectiveness of the programs that they're promoting, things like expanding Medicaid coverage or the permanent expansion of the child tax credit, or things like addressing climate change. And those things are expensive. You know, they point to data like what we saw from yesterday from the Census Bureau that showed pandemic relief programs helped reduce poverty. They also say that the taxes are focused specifically on the rich, and it would be a test for Democrats' entire vision for this to go forward.
KING: NPR's congressional correspondent Kelsey Snell. Thank you, Kelsey.
SNELL: Thanks for having me. Transcript provided by NPR, Copyright NPR.