US Senator Bernie Sanders (I-Vt.) introduced a fresh round of tax hikes on corporations and wealthy families on Thursday in efforts to raise funds for future Democratic priorities and to smooth the economic turmoil triggered by the coronavirus pandemic. Writes Rachel Buchinno
One measure would increase the corporate tax rate to 35 percent and seeks to deter companies from taking profits offshore to reduce their tax liability. The rate stands at 21 percent after Republicans decreased it from 35 percent as part of their 2017 tax law.
Another proposal from the Senate Budget Committee chairman would target the richest Americans, as he created a new progressive estate tax, which would put a 45 percent levy on estates valued between $3.5 million and $10 million. The rate would also reach as much as 65 percent on estates worth more than $1 billion.
“We have a tax code which enables the very, very richest people in America and the largest corporations to avoid paying their share of taxes. That has got to change,” Sanders said Thursday during a Budget Committee hearing.
Democratic Sens. Kirsten Gillibrand (N.Y.), Sheldon Whitehouse (R.I.), Jack Reed (R.I.) and Chris Van Hollen (Md.) co-sponsored the estate-tax plan. Rep. Jimmy Gomez (D-Calif.) will bring a version of the bill to the House, and Rep. Jan Schakowsky (D-Ill.) will introduce the corporate tax plan.
The tax push comes as Democrats plan to put forward massive bills targeting the country’s infrastructure and climate crisis, as well as family policies including expanded paid leave, free community college and universal pre-kindergarten programs. Democrats and the White House are reportedly looking into a $3 trillion infrastructure package that would serve as the foundation for President Joe Biden’s goal to “Build Back Better.”
But Sanders and Democrats will likely face pushback from Republicans on raising taxes, which could spark discussions among Democrats to pursue any future tax hike through budget reconciliation, a legislative procedure that would require support from the 50 Democrats in the Senate, along with independents that stand behind the effort.
“I don’t think there’s going to be any enthusiasm on our side for a tax increase,” Senate Minority Leader Mitch McConnell (R-Ky.) told reporters earlier this month.
Senate Budget Committee ranking member Lindsey Graham (R-S.C.) also rejected the tax increases at the hearing on Thursday.
Experts voiced doubt in the tax hike’s success in the Senate, as increasing the corporate tax rate would likely drive businesses and corporation investments out of the United States.
“Increasing the federal corporate income tax rate to 35 percent… would put the United States far out of alignment with other countries’ corporate income tax rates,” Alan D. Viard, a resident scholar at the American Enterprise Institute, said. “The high corporate income tax rate would increase incentives to move business investment outside of the United States, book profits outside of the United States and charter corporations outside of the United States.”
Lawrence A. Zelenak, the Pamela B. Gann Professor of Law at Duke University School of Law, said he “wouldn’t be surprised if the current Congress enacts some increase in the corporate tax rate” but noted that it’s unlikely it would reach as high as 35 percent.
“[Twenty-eight percent] is probably the highest rate with any serious chance of enactment, and something around 25 percent is the most likely outcome,” Zelenak said, adding “assuming there’s any increase at all.”
The tax increase plans introduced by Sanders are even larger than Biden has considered, as the president has backed hiking the corporate rate to 28 percent, seven percent less than what the Vermont Senator is calling for. Biden has also signaled interest in boosting the income tax rate to 39.6 percent for Americans making more than $400,000.
Rachel Bucchino is a reporter at the National Interest. Her work has appeared in The Washington Post, U.S. News & World Report and The Hill.