Tax Proposal To Bolster Medicare Raising Concerns For Wealthy Business Owners
Senate Majority Leader Chuck Schumer’s plan to increase taxes on some businesses to bolster Medicare raised alarms about inflation, potentially complicating attempts to pass a broad economic package. Schumer’s plan would expand a 3.8% net investment income tax to the profits pass-through entities distribute to their owners, so long as those individuals earn more than $400,000. Under current law, the investment tax only applies to individuals and estates.
Lawmakers expressed concern about the impact of federal spending on inflation just hours after the government reported that the consumer price index shot up 9.1% in June. Due to this, some lawmakers urge that the proposal rolled out to increase taxes on pass-through entities, like limited partnerships and other small businesses, should be analyzed to ensure that it does not fuel inflation or harm taxpayers. Despite weeks of talks between lawmakers about a climate, health, and deficit reduction plan funded by tax hikes, there are few public signs of progress in reaching an agreement. Business groups are urging lawmakers to scale back the proposed levies, while progressives are urging lawmakers to preserve the tax increases for wealthy individuals.
In addition to the debate over the tax increase on pass-throughs, progressives are urging Senators to preserve other tax increases that would affect the wealthy. One focus is the millionaires’ surtax, which would put a 5% surcharge on incomes over $10 million and an additional 3% levy on incomes over $25 million, which is at risk of being cut from the package. Last year, other tax hikes, such as raising the top tax bracket or increasing capital gains rates, were eliminated from the negotiations. Progressives fear that dropping proposals like the pass-through tax expansion and a surcharge on the ultra-wealthy would mean that high net-worth individuals would face little to no tax increases in a bill initially envisioned as a significant tax hike on top earners.
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