The following is a statement from Amy Hanauer, executive director of the Institute on Taxation and Economic Policy, regarding the House Ways and Means Committee’s proposal to raise revenue.
“House Ways and Means committee proposals to raise revenue would significantly improve our tax system but fall short of the President’s plan. Earlier this year, the Biden administration put forth a transformative tax proposal that would raise significant revenue, reduce corporate tax avoidance, and substantially increase taxes paid by the wealthiest individuals. The Ways and Means Committee has kept some of these important reforms but has diluted others in ways that would leave some of the work of tax reform undone.
“Important reforms that remain intact include proposals to restore the top tax rate on ‘ordinary’ income to 39.6 percent, remove loopholes in the 3.8 percent health tax so that certain business income going to the well-off no longer escapes the tax, and increase IRS funding to enforce tax laws on wealthy people. Unfortunately, the Ways and Means proposal retreats on equalizing tax rates between earnings on wealth and earnings on work, narrowing the difference between the two but not eliminating it as the Biden plan does.
“One of the most transformative elements of the Biden plan would eliminate the stepped-up basis, which allows wealthy people to escape paying taxes when their income takes the form of asset appreciation. The Ways and Means proposal leaves this break in place, meaning most of the income of billionaires like Jeff Bezos and Elon Musk may never be taxed. Members of the House should amend the proposal to include this reform, and the Senate should include it in their version of the bill.
“On corporate reform, the Ways and Means version raises the statutory corporate income tax rate and narrows the gap between rates corporations pay on domestic and international profits, but in both cases does so less than the Biden plan. This means that the Biden plan would raise more from corporations and do more to reduce incentives to shift investment offshore.
“The proposals from the Ways and Means committee make the U.S. tax code more equitable and raise substantial revenue from those most able to pay. These proposals would be the most significant progressive reforms to our tax code in generations. Yet they fall short of the plan released by the Biden administration earlier this year and leave some of the crucial work of tax reform undone. Congress has an opportunity to make sure that the country does not miss this historic opportunity to truly transform the tax code.”