Skip to main content

TAX TAKE: Stayin' Alive: Can Raising Tax Rates Make a Comeback This Year?

Tax Alert

Democrats considered raising tax rates on wealthier individuals and businesses as part of their Build Back Better agenda, although those efforts were ultimately dropped in the House-passed bill in light of objections from Senator Kyrsten Sinema (D-AZ). Nevertheless, Senator Joe Manchin (D-WV) has recently been calling for reconsideration of raising tax rates. Specifically, he proposes to increase the corporate rate to 25 percent, the ordinary income rate to 39.6 percent, and the capital gains rate to 28 percent – breathing new life into these proposals.
Manchin's proposals come as Congress and the Biden Administration are considering measures to tackle inflation and the national debt. Manchin is a crucial Democratic vote in the Senate and for President Biden to have success passing any scaled-back version of his Build Back Better agenda this year, Manchin will play a key role shaping that legislation.
It is important to note that Manchin has proposed raising taxes in the recent past. Last July, he proposed an agreement to Senate Majority Leader Chuck Schumer (D-NY) to raise corporate, individual, and capital gains rates, as well as changing the taxation of carried interest.
So what happens next? Manchin seems to be providing Democrats a potential framework for passing a spending agenda that includes revenue raising measures capable of more than offsetting the spending proposals – thus reducing the deficit and, according to Democrats, addressing inflation.
Of course, a key factor that will determine the fate of tax rate hikes this year will be how they are received by other Democratic moderates, particularly Senator Sinema. Sinema continues to be opposed to such tax increases. As the pending mid-term elections get closer, such opposition may get stronger, particularly with her colleague Senator Mark Kelly (D-AZ) expected to be in a very tight race for re-election.
One thing is clear: Manchin is intent to advance his tax proposals as a way to combat inflation and the deficit, meaning they will receive serious consideration and stay alive. Thus, tax rate increases will remain on the table as the Build Back Better agenda continues to be considered. #TaxTake

Upcoming Speaking Engagements and Events

On March 3, Jorge and Marc will moderate "Floyd's Panel: Legislative Update" at the Federal Bar Association's 46th Annual Tax Law Conference.

The information contained in this communication is not intended as legal advice or as an opinion on specific facts. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. For more information, please contact one of the senders or your existing Miller & Chevalier lawyer contact. The invitation to contact the firm and its lawyers is not to be construed as a solicitation for legal work. Any new lawyer-client relationship will be confirmed in writing.

This, and related communications, are protected by copyright laws and treaties. You may make a single copy for personal use. You may make copies for others, but not for commercial purposes. If you give a copy to anyone else, it must be in its original, unmodified form, and must include all attributions of authorship, copyright notices, and republication notices. Except as described above, it is unlawful to copy, republish, redistribute, and/or alter this presentation without prior written consent of the copyright holder.