White House Chief of Staff Ron Klain on Wednesday claimed in front of an audience of Wall Street titans that the Democrats’ $3.5 trillion spending bonanza would “cost zero.”
He said that’s because the proposal already has a plan to fund its wish list, which includes a huge increase in social spending and so-called green spending.
“We have found a way to pay for every part of the spending with taxes,” Klain said in front of an audience of financial industry poohbahs at the annual SALT conference in New York. “The net cost of ‘Build Back Better’ is zero,” he said of the White House’s plan.
That wasn’t exactly music to many attendees ears.
A money manager told the Post that in a “coronavirus environment” he hoped there would be less talk about raising taxes. The economy is marching back to health and the upper middle class, especially, he said, don’t need to be dealing with tax increases.
He didn’t want to be named. Other people at the conference who said they were opposed to many of the tax hikes told The Post they also didn’t want to speak on the record over worries their comments would seem tone-deaf.
Robert Wolf, the former chief executive of UBS Americas, who interviewed Klain on stage at the event, said he believed even Republicans would have a hard time opposing some of the tax hikes given recent publicity around some ultra-wealthy people and profitable companies paying very little in federal income tax.
“I know my Republican friends will never admit it, but when you talk about the idea of a minimum global tax … that the 50 or 60 top Fortune 500 companies didn’t pay any taxes, I know they’d support that.” A minimum global corporate tax rate of 15 percent has been agreed to by 130 countries.
The proposal unveiled by House Democrats on Monday looks to hike taxes substantially, including raising the corporate tax rate from 21 percent to 26.5 percent, hiking the capital gains tax rate from 20 percent to 25 percent, and increasing the top individual income tax rate rate from 37 percent to 39.6 percent.
When it comes to individuals, President Joe Biden has promised his tax-increase plan wouldn’t apply to people with incomes over $400,000, but it’s unclear if the current plans on the table would adhere to that pledge.
The revenue streams that pay for the bill are largely focused on raising taxes on “high net worth” individuals — and also on corporations.
Klain said the White House hopes to promote “fairness,” but tailored his message to the audience of investors and money managers at the conference. “The people at the top will still do very well,” he promised the group. “These are reasonable provisions to rebalance the tax code.”
But Klain failed to address the two biggest concerns financiers tell The Post they’re facing: state and local tax deductions and whether an increase in capital gains tax rates will be levied retroactively.
Charles Myers of Signum Global, an advisory firm, told The Post that his clients are worried about both — because it “affects them personally.”
Many wealthy individuals are resigned to the idea that capital gains taxes will increase, but they’re frustrated it’s not clear whether the increased tax will begin in January 2022 , or will be retroactive to September.
If the capital gains tax begins January 2022, investors will have time to sell stocks and take profits before the rate increases, but if the tax is levied retroactively, investors won’t be able to prepare for the hike. Current proposals being floated would make capital gains taxes retroactive to September — but that date could be changed.
The cap on state and local tax deductions, called SALT, now prevents taxpayers from deducting more than $10,000 of state and local taxes from their federal return. That also remains a topic of concern among the moneyed class — and the middle class — in New York and other blue states that have high local tax rates.
Neither tax proposal floated by Democrats in the House or the Senate so much as mentioned the SALT deductions, according to memos reviewed by The Post. But people close to the legislative process say they expect significant changes before a bill is actually passed into law.
“Restoring the SALT deduction for New York helps firefighters, teachers, transit workers and so many other everyday homeowners now faced with unfair double taxation,” Angelo Roefaro, a spokesman for Sen. Chuck Schumer, Democrat of New York, told The Post. He said Schumer would push for a restoration of SALT deductions.
Still, Democrats are struggling to unify their own party when it comes to taxing and spending trillions of dollars. Moderate members like Sen. Joe Manchin of West Virginia and Sen. Krysten Sinema of Arizona have said they will not support a $3.5 trillion bill. Manchin has suggested he won’t support a bill larger than $1.5 trillion. Machin and Sen. Mark Warner of Virginia have both said they won’t approve a corporate tax rate that exceeds 25 percent. And in the House, Democrats can’t lose more than three votes for the bill to pass.
Democrats are aiming to raise $3.5 trillion over 10 years, sources with knowledge of the process told The Post. But it’s more likely they’ll only receive approval for around $1.5 trillion worth of tax increases given Manchin’s recent comments.
The tax hikes on the table would fund various proposals that include universal prekindergarten, broadened Medicare benefits, free community college and what Democrats say are measures to deal with climate change.