Biden’s plans to raise taxes on corporations and the wealthy are losing momentum

To be fair, the lack of headway on tax reform is not necessarily for lack of effort by the Biden administration.

Any mention of raising the domestic corporate tax rate from its current 21% is a non-starter for Republicans and some economists, who say it’s still too early into the economic recovery to ask the nation’s businesses to send an even greater proportion of their profits to Uncle Sam.

That opposition poses a significant barrier for Democrats, who hold a narrow majority in the House and are split 50-50 with the GOP in the Senate.

Despite a $1.9 trillion Covid-19 rescue law, a $1.2 trillion physical infrastructure plan and another $1.8 trillion proposed for families, child care and paid worker leave programs, the Biden administration has failed thus far to bring its tax proposals as far.

Tax increases are “off the table,” Sen. Mitt Romney, a Utah Republican involved in the bipartisan infrastructure talks, told reporters last month. Sen. Jon Tester, a Montana Democrat who has joined in the negotiations, said at the time that paying for infrastructure  “is probably the toughest part about this, from my perspective.”

BlackRock, the world’s largest asset manager, told clients in late June that it still expects the Biden White House to raise some taxes to help offset the historic level of spending.

“The direction of travel for corporate taxes, even though the outlook is uncertain, is higher,” Kurt Reiman, BlackRock’s senior strategist for North America, told CNBC last week. “We think the Democrats are going to use this open window during the summer and fall, ahead of campaigning for the midterms, to advance their legislative agenda.”

Specifically, BlackRock’s managers warned that if the proposed 28% corporate income tax rate and a 21% global minimum tax were imposed, the earnings per share of the SP 500 could fall as much as 7% lower in 2022. 

Reiman and his colleagues believe that while it’s likely Democrats will manage to move tax rates higher, the hikes will be more modest than Biden’s initial proposals. They note, for example, Biden’s willingness to consider a more moderate increase in the top corporate tax rate to 25%, as favored by key centrist Sen. Joe Manchin, D-W.Va.

“These programs are going to need to be financed in part by higher corporate — and maybe even individual — tax rates if they’re going to pass it through the Senate under reconciliation,” Reiman added. 

Article source: https://www.cnbc.com/2021/07/07/biden-tax-plan-corporate-capital-gains-and-income-hike-uncertain.html