Last week, Bloomberg reported that Senate Democrats have re-engaged in negotiations with West Virginia Senator Joe Manchin over passing a “skinny” version of President Biden’s Build Back Better Act. Manchin was one of the primary reasons the original Build Back Better Act failed to advance through the Senate after passing the House, so if Senate Democrats can get him on board, there’s good reason to believe Biden’s would-be signature economic package might pass in some form after all.
The bad news, however, is that this “skinny” Build Back Better bill is nowhere near as ambitious or significant as the original version, especially regarding tax increases on the rich. Manchin is allegedly demanding that the new plan cost no more than $1 trillion – with $500 billion going towards deficit-reducing tax hikes – and Senator Sinema, his equally recalcitrant counterpart, remains firmly against virtually all tax increases on wealthy Americans. To meet this demand and secure their votes, Democrats appear to be preparing to water down many of their original tax initiatives.
It looks like the 15% global minimum corporate tax, which 136 countries in the OECD agreed on back in October, will likely remain in the bill but in a weakened form. The original idea in the OECD agreement, reflected in the Build Back Better Act passed by the House in November, involved taxing large, multinational corporations at a 15% minimum rate in each country in which they operate. Now, the initiative is apparently being watered down to allow companies to combine their profits from different countries to meet the 15% minimum threshold. Additionally, there are also reports that Democrats are considering weakening the 15% domestic minimum tax on financial profits of American corporations and giving companies more time to comply with any new tax changes.
This is nothing short of an outrage. These watered-down tax initiatives would do virtually nothing to prevent the worst of corporate tax avoidance and end the “race to the bottom” as the OECD intended. They would completely fail to stop or discourage recent corporate price-gouging that has disproportionately contributed to record-level inflation and would be a slap in the face for all the responsible taxpayers and small businesses who are not able to take advantage of the many, many loopholes large corporations currently abuse.
But that’s not the worst of it. There are now reports that Democrats have completely scrapped the millionaire surtax in their new plan. This surtax, included in the original Build Back Better Act, would have added a 5% surtax on incomes above $10 million and an additional 3% surtax on incomes above $25 million. This would have affected 22,000 households – .02% of all taxpayers – and raised $230 billion in new revenue.
It’s almost certain that Senator Kyrsten Sinema is behind the removal of the last remaining piece of Build Back Better that could be credibly described as “taxing the rich.” Manchin has been a problem on many other issues, but for the most part, he’s been willing to agree to some moderate tax changes. Sinema, on the other hand, has been a stubborn roadblock on behalf of the ultra-wealthy donors she spends so much time with.
In response to the news regarding the millionaire surtax, John LaBombard, Sinema’s former Communications Director, said, “Her position is now is not the time to raise taxes in any way that would harm small business owners or individuals who are not super rich.” If this statement is to be taken as a legitimate reflection of Sinema’s position, then it is clear that she does not actually understand the surtax that, ironically enough, she was instrumental in crafting. By definition, the surtax would only impact a few thousand of the wealthiest households in America. And take it from us – any business owner raking in $10 million a year is in no way, shape, or form “small.”
Let’s not kid ourselves, though. Sinema isn’t confused: she’s simply bowing to the wishes of her ultra-rich donors. In April, Sinema pledged at an Arizona Chamber of Commerce event that she would be “the same person” in any revived Build Back Better negotiations. If Sinema is behind the reported removal of the millionaire surtax, then she is certainly staying true to her word and once again bending over backwards to serve the financial interests of her donors at the expense of her constituents and the American people.
We fully acknowledge and appreciate that some progress is better than nothing on the tax front. We also recognize that Senate Democrats have their hands tied with their slim majority and their need to appease every member of their caucus. But the American people aren’t going to accept excuses. They want meaningful change to our tax code that demands more from the richest Americans, and unless Democrats deliver it, they’re going to be in trouble in November.