Here’s what to know about the Manchin-Schumer tax deal

Of more than 40 tax increases Democrats had seriously considered, the plan only includes two, according to a summary provided by Manchin’s office – one imposing a new kind of minimum tax on big business and one plan to compress the so-called loophole carried interest, something Democrats have been trying to eliminate for years.

Along with this, there is a proposal to strengthen IRS enforcement, whose budget markers would also generate savings for the government.

Although the fine print has yet to be shared, here are three things to know about the tax treaty:

NEW MINIMUM TAX ON LARGE COMPANIES: The proposal would create a new 15% minimum tax on large corporations. The details are still sketchy, but it’s aimed at companies that report big profits on Wall Street but seem to pay little or nothing to the IRS.

“It is common sense that a national minimum corporate tax of 15% should only be applied to billion-dollar companies,” Manchin (DW.Va.) said.

This proposal has been heavily criticized by tax scholars who see it more as a statement for politicians than a serious tax proposal. They say there are legitimate reasons companies would tell investors one thing and the IRS another, including that companies are required to use different accounting rules when reporting to the Securities and Exchange. Commission and the IRS.

Critics note that Congress tried something like this before, back in the 1980s, and repealed it soon after.

Democrats were forced to turn to the proposal after the senator. Kirsten Sinema (D-Arizona) balked at their original plan to undo the steep corporate tax cut Republicans imposed in 2017.

A number of industries warned that the plan would have unintended consequences and argued for exemptions from the tax.

Green energy companies say they would lose radiation, undermining efforts to tackle climate change. Manufacturers call it a disguised repeal of popular capital cost allowances. Firms with pensions warn they will be hit, and state governments fear it will make the tax-exempt bonds they use to raise funds less attractive.

SCOPE OF INTEREST: Democrats have been trying to close the so-called interest loophole for more than a decade, but have been blocked by Wall Street lobbyists and, ironically, Schumer (DN.Y.).

Much criticized provision allows private equity firms and other fund managers to treat part of their income as capital gains, which are subject to a maximum rate of 20%, instead of much higher ordinary tax rates students.

Republicans reduced that break as part of their 2017 tax cuts, making it harder to claim, though they weren’t able to get rid of it completely either.

The attack on carried interest had been overshadowed by many other more ambitious plans by Democrats to raise taxes on the wealthy, and it would not go as far as their other proposals to fool the well-to-do who fell to the brink path.

But including it will at least allow Democrats to say they’re raising taxes on the wealthy, and they say it will generate $14 billion in savings for the Treasury.

IMPROVE TAX ENFORCEMENT: The increase in IRS funding is intended to bring money back to the federal treasury by giving the agency more leverage to tackle unpaid taxes. Exactly how much more is up for debate, and Democrats have been in big fights with official congressional markers over how much more revenue they could set aside.

Manchin’s summary says they have $124 billion in savings, though it’s unclear if that’s net of their IRS budget increase, and a spokesperson for Manchin didn’t. precise. Either way, that would be just a fraction of the $400 billion the Biden administration had hoped to raise from increased audits.