As Wall Street watches the debate over President Joe Biden’s flagship infrastructure, climate and social spending plans in Washington, it has one major question: Will corporations pay more in tax to fund the programs?
This week, investors could get an answer, as Democrats race to finalize a package and get it over to Biden before he leaves on a trip to Europe. What’s happening: The Biden administration wanted to raise the corporate tax rate to 28% from 21%, while Democrats in the House had pitched a 26.5% rate. Yet lawmakers have indicated they’re pivoting away from corporate tax hikes due to opposition from Arizona Sen. Kyrsten Sinema, a crucial swing vote.
Biden said last week that Sinema “says she won’t raise a single penny in taxes on the corporate side and on wealthy people,” a major obstacle to fulfilling his pledge to fully pay for the package. That’s spurred a search for alternative funding options. On Sunday, House Speaker Nancy Pelosi told CNN’s Jake Tapper that the legislation will “probably have a wealth tax,” though that would provide “only 10%” of what’s needed.
Treasury Secretary Janet Yellen told Tapper that Democrats are considering a new tax “on liquid assets held by extremely wealthy individuals.” She said it would target unrealized capital gains, which are an “extraordinarily large part” of how the rich amass wealth. This policy would compel billionaires to pay an annual tax on assets like stocks, bonds and real estate that have appreciated but haven’t been sold. Nothing is set in stone. But the apparent move away from corporate tax increases could feed the recent stock market rally. The Dow hit an all-time high on Friday after the S&P 500 notched a new record on Thursday.