US Democrats set to propose 26.5% corporate tax rate in $3.5 trillion plan

As US Democratic Party members brace for a tough political battle to defend President Joe Biden’s $3.5 trillion stimulus, the Washington Post (WaPo) conveyed, “Some House Democrats on Sunday circulated a draft plan that would raise $2.9 trillion in new taxes targeted toward wealthy Americans, corporations and investors, as party lawmakers continued to spar in public over the size and scope of their new tax-and spending package.”

Increasing the top tax rate on Americans earning over $435,000 to 39.6% from 37% and a new corporate tax rate of 26.5%, versus 21% current rate and 28% proposal by President Biden is among the top-tier proposals by the Democrats cited on Sunday, per WaPo.

Additional details suggest a smaller-than-expected capital gains rate paid by investors from 20% to 25%, as well as ‘surtax on high-income individuals’, earning more than $5 million, signaled to raised $127 billion more government revenues.

Key quotes (from Washington Post)

Democrats contended the total slate of proposed tax increases can raise as much as $2.9 trillion, which Democrats cautioned in the document is a preliminary estimate.

Lawmakers believe this means the total $3.5 trillion package is fully paid for since it also relies on a budgetary move known as dynamic scoring that takes into account the economic activity generated by Federal spending.

Market reactions

With a bit of balancing in previously rejected demands for the much-awaited stimulus, as hinted by the news, markets welcomed the news with an uptick in the S&P 500 Futures. However, fears of a bumpy road for the aid package and tax hike concerns tame the bulls.

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