(Adds additional detail, White House comment)

By Pete Schroeder

WASHINGTON, Sept 12 (Reuters) - U.S. House Democrats are expected to propose raising 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.

Democrats 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.

They are also considering raising the minimum tax on U.S. companies' foreign income to 16.5% from 10.5% and the top capital gains tax rate to 28.8% from 23.8%.

The Wall Street Journal first reported the outline of the proposal, citing a congressional aide. A spokesman for the House Ways and Means Committee, which is responsible for tax policy, did not immediately respond to a request for comment.

In a statement, White House spokesman Andrew Bates said 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."

The overall package of tax changes, summarized in a four-page document circulating among lobbyists and congressional aides on Sunday, was estimated to raise $2.9 trillion in new revenue, largely covering the costs of President Joe Biden's $3.5 trillion domestic investment plan.

The proposal would also raise the top individual tax rate to 39.6% from 37%, as part of a series of changes aimed at high income individuals that was estimated to raise approximately $1 trillion.

The package also includes $80 billion more in additional funding for the Internal Revenue Service specifically devoted to tax enforcement of high income taxpayers, which could raise as much as $200 billion in additional revenue. (Reporting by Pete Schroeder; additional reporting by David Shepherdson and Trevor Hunnicutt; editing by Richard Pullin and Sam Holmes)