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House Democrats’ plan to tax the rich leaves vast fortunes unscathed

In other areas, the committee seems to be paying only glances at the wealthiest Americans. Former President Barack Obama, Mr. Trump and Mr. Biden have all pledged to close the so-called deferred interest loophole, in which private equity managers pay low capital gains taxes on the fees they charge clients, claiming that the money is not income because it is made from their clients’ investment capital gains.

Senate Democrats have proposed closing the loophole completely, saving the Treasury $ 63 billion over 10 years. The House proposal would simply limit the practice, requiring Wall Street financiers to hold their clients’ investment gains for five years before claiming them as capital gains and cashing them out. This would save $ 14 billion, a fraction of the Senate proposal.

Another element missing from the House’s plan is a measure aimed at more aggressively taxing estates. Mr Biden and many other Democrats want assets like stocks and real estate to be taxed when inherited by wealthy heirs, based on the capital gain from when the original owner has them. bought. Under current law, these assets are only subject to capital gains tax when they are sold, depending on their value at the time they were inherited, allowing all gains in value over the lifetime of the super-rich not to be taxed as long as they are passed on to the heirs.

But the new proposal has faced a fierce lobbying campaign, led by rural Democrats like former Senators Heidi Heitkamp of North Dakota and Max Baucus of Montana. Representative Richard E. Neal of Massachusetts, Democratic Chairman of the Ways and Means Committee, left it out.

To some Liberals, Mr. Neal’s pragmatism was more like a capitulation.

“America’s billionaires are popping champagne tonight as the House Ways and Means Committee – headed by President Richie Neal – fails the president, fails the country and fails history,” said Erica Payne, chairman of Patriotic Millionaires, a group of wealthy liberals who embrace much higher taxes on the wealthy.

Some Democrats expressed surprise at Mr Neal’s political calculations on Monday.

“A wealth tax? I don’t know of anyone who says it doesn’t work for them politically, ”said Rep. Donald S. Beyer Jr., Democrat of Virginia and committee member.

But with West Virginia Democrat Senator Joe Manchin III suggesting the final package may have to be half the size of the House plan, Beyer said he understands why Democratic leaders don’t want vulnerable lawmakers adopt the more aggressive options. .

nytimes Gt