Democrats have rallied around raising taxes on the rich — though that will likely be easier said than done, even if they manage to also win control of the Senate.
The economy will surely still be on the mend, which could give some lawmakers second thoughts about raising taxes — at least immediately.
What’s more, some of the ideas Democrats are proposing would be new and complicated, and lawmakers will have to decide if they want to delve into the complexities of things like “mark to market” taxation — an annual tax on unrealized capital gains — that would bring lobbyists out in droves.
There will be other challenges.
President-elect Joe Biden wants to raise capital gains tax rates by so much that Congress’ official scorekeepers may say it would actually lose revenue for the government, compared to leaving current policy alone, because so many people would stop selling assets in order to avoid paying the tax.
And Biden has a proposal to force the rich to pay more in Social Security taxes that would face a major procedural hurdle in the Senate. There’s a ban there on tinkering with Social Security by using so-called reconciliation, a parliamentary tool Democrats would likely need to push any plan through the chamber (unless they eliminate the filibuster).
More likely to pass are proposals to roll back parts of the Tax Cuts and Jobs Act, such as its lower rates on the wealthy and corporations. Democrats have been lambasting the $1.5 trillion tax cut for years, so that should be relatively easy to agree upon.
But even there, there will be challenges: Democrats are internally divided over repealing the law’s $10,000 cap on state and local tax deductions. Lawmakers from coastal blue states with high taxes are adamant about repealing the limit, but others from the Midwest and elsewhere scoff at the cost and the fact that it would mostly benefit the well-to-do.
Democrats probably won’t pass a big standalone tax bill like the Tax Cuts and Jobs Act instead relying on tax increases to defray the cost of their other proposals.
Of course, if Republicans hang onto the Senate, then Democrats will have to rethink much of their tax plans, given the GOP’s opposition to raising taxes.
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