Democrats in Congress got a head start on their tax-increase agenda by reportedly sneaking a trio of surprise tax hikes into President Joe Biden's $1.9 trillion coronavirus relief package.
The spate of new taxes, which together amount to $60 billion, target wealthy and big corporations.
"One takes away deductions for publicly traded companies that pay top employees more than $1 million. Another provision cracks down on how multinational corporations do their taxes. A third targets how owners of unincorporated businesses account for their losses," Politico reported Wednesday.
Politico added that while the tax hikes are aligned with the Democrats' agenda of raising taxes on the rich, they fell under the radar because of their relative obscurity.
"Unlike things like raising the corporate tax rate or upping the top marginal tax rate on the rich, the ones they chose won't produce many headlines," the outlet noted.
The proposals were also added late in the legislative process and, consequently, lobbyists weren't able to rally opposition in time.
"Everybody was caught by surprise," a former Democratic aide told Politico. "They picked obscure items — things that were not on the radar."
While Democratic lawmakers were expected to put off tax increases until later in Biden's term, evidently they couldn't resist the opportunity once it presented itself. Having reportedly run into problems "complying with the stringent budget rules surrounding so-called reconciliation measures like the coronavirus legislation," Democrats instituted the tax hikes to "shield the entire measure from a Republican filibuster in the Senate."
Translation: They were spending too much money, so in order to keep the mammoth legislation from facing further scrutiny in the form of a filibuster, Democrats took from the wealthy to pay for the plan, thus lowering the cost.
Politico portrays Democrats as reluctant to take the action, however, it's hard to conceive how raising taxes on the wealthy with the added benefit of sticking it to Republicans in the process is something that Democrats wouldn't be desirous to do. After all, the tax hikes fit perfectly into the Democratic economic agenda.
Either way, news that Congress raised taxes at all during a time of continued economic difficulty brought on by the coronavirus pandemic may rub many Americans the wrong way. Though Democrats would likely argue that the tax hikes paved the way for including measures such as waiving taxes on unemployment benefits.
Speaking with National Interest, Alan Viard, a resident scholar at the American Enterprise Institute, said, "The Democrats would argue that these particular tax hikes will have little impact on aggregate demand and that including them in the bill allowed the inclusion of additional tax cuts (that the Democrats believe will have significant effects on aggregate demand) with no net revenue loss."