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US House Democrats eye corporate tax rate hike, surtax on wealthy in spending package: Sources

US Rep. Ilhan Omar (D-MN) (L) talks with Speaker of the House Nancy Pelosi (D-CA) during a rally with fellow Democrats before voting on H.R. 1, or the People Act, on the East Steps of the US Capitol on March 08, 2019 in Washington, DC. (AFP photo)
Police officers wearing face masks guard the US Capitol Building in Washington, US, May 14, 2020. (Reuters photo)

US House Democrats are looking to raise the corporate tax rate to 26.5% from 21% as part of a sweeping plan that includes tax increases on the wealthy, corporations, and investors, according to two people familiar with the matter.

The proposed rate of 26.5% would be higher than the current rate of 21% but lower than Democratic President Joe Biden's proposed rate of 28%.

Democrats want to take the measure as a way to help pay for their $3.5 trillion social spending plan, according to the two sources.

They are also seeking to increase the minimum tax on American companies' foreign income to 16.5% from 10.5% and the top capital gains tax rate to 28.8% from 23.8%.

In addition, Democrats are considering an increase in the top capital gains rate from 20% to 25%, which is significantly less of an increase than Biden proposed.

They are also expected to propose a 3% surtax on individual income above $5 million as part of a wide-ranging $3.5 trillion budget bill.

The proposal, the outline of which The Wall Street Journal first reported, citing a congressional aide, would raise the top individual tax rate to 39.6% from 37%.

A spokesman for the House Ways and Means Committee, which is responsible for tax policy, has not yet responded to a request for comment.

House Democrats are making "significant progress towards ensuring our economy rewards work and not just wealth by cutting taxes for middle class families; reforming the tax code to prevent the offshoring of American jobs; and making sure the wealthiest Americans and big corporations pay their fair share," said White House spokesman Andrew Bates in a statement.

The overall package of tax changes, summarized in a four-page document, circulated among lobbyists and congressional aides on Sunday.

It was estimated to raise $2.9 trillion in new revenue, largely covering the costs of the $3.5 trillion domestic investment plan.

The package also includes $80 billion more in extra funding for the Internal Revenue Service specifically allotted to tax enforcement of high income taxpayers, which could raise as much as $200 billion in additional revenue.

A final piece of legislation needs to be approved by Democrats in both the House and the Senate, as well as the White House.

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