Democrats Hit Tax Snag As They Finalize Build Back Better Deal
WASHINGTON ― Democrats’ toughest challenge in finishing a framework agreement for their Build Back Better bill this week might be taxes.
Party leaders are trying to win over two senators who have mutually exclusive demands: Sen. Kyrsten Sinema (Ariz.) won’t support higher tax rates, and Sen. Joe Manchin (W.Va.) doesn’t like the new capital gains tax idea that was supposed to be a palatable alternative.
“Every sensible revenue option seems to be destroyed,” Sen. Bernie Sanders (I-Vt.) said Wednesday, offering a gloomy summary of the conundrum Democrats find themselves in.
“Should we raise corporate tax rates, personal income taxes for the very wealthy? Of course we should, but at least one person in the caucus doesn’t want to do that,” Sanders continued. “Should we demand that the billionaires pay their fair share of taxes? Yes. There’s another person who doesn’t want to do that.”
Democrats are hoping to seal the outlines of a deal by Wednesday evening before President Joe Biden departs the country to attend a global climate conference in Scotland. They can’t move forward until they lock down the revenue side of the negotiations, which will in turn determine what sorts of programs they can include in the bill.
The Senate Finance Committee this week unveiled two proposals aimed at raising hundreds of billions in revenue to offset the cost of the bill — a corporate minimum tax, which appears to have unanimous Democratic support, as well as a “billionaires’ income tax” that would target the roughly 700 wealthiest Americans.
Several Democrats have expressed concerns about the billionaires’ tax besides Manchin. A plethora of House Democrats said they don’t like it, and Sen. Mark Warner (D-Va.) told HuffPost on Wednesday he worried it could “totally disrupt public markets.”
Democrats had originally planned to pay for a child allowance, universal prekindergarten, green infrastructure, child care subsidies and expanded public health insurance by partially reversing some of the individual and corporate tax cuts Republicans enacted in 2017.
House Democrats, led by Ways and Means chair Richard Neal (D-Mass.) dropped an idea to close a loophole that lets heirs avoid capital gains taxes on inheritable assets, instead adding a surcharge for people with annual incomes above $5 million and a stronger estate tax.
But when Sinema wouldn’t budge from her opposition to higher rates, Senate Finance chair Ron Wyden (D-Ore.) turned to the idea of an annual tax on billionaires’ unrealized capital gains — essentially another way of taxing the same stockpiled wealth targeted in the original plan. It’s possible that rising opposition to the billionaires’ tax, which is novel and much more complicated than just increasing rates, could force Democrats back to their original rate hikes.
Manchin has also floated the idea of what he called a “patriotic” 15% tax on wealthy people.
There are a handful of outstanding issues on the social policy side to figure out still, as well. Those include whether to include a Medicare expansion for vision, hearing, and dental coverage, a Medicaid expansion, a paid family and sick leave program, robust climate measures, immigration reform provisions, and prescription drug reform.
Democrats have already watered down many of these proposals in order to get their moderates on board. On paid leave, for example, lawmakers are discussing a much narrower proposal that would only cover new parents. But it may get left out entirely.
Manchin and Sinema huddled with top White House officials at the Capitol on Wednesday but it was unclear whether they’d agreed on a framework for the bill.
“We’re making progress, doing well,” Sinema told HuffPost, giving a thumbs up.
Manchin said it was up to “everyone in the caucus to have their input.”
“There’s 50 people … it’s up to everybody being involved and see where everybody is,” he told HuffPost after the meeting.
While a deal might be imminent in the Senate, in the House, there’s been a month-long stalemate between the moderate and progressive factions over the passage of the bipartisan infrastructure bill the Senate passed last month that remains unresolved.
Democratic House leadership is aiming to schedule a vote on the bipartisan infrastructure bill by the end of this week at the urging of moderate lawmakers. But the progressive faction wants to see the Senate vote on a robust reconciliation bill that addresses their priorities around climate and social welfare before they agree to send the bipartisan infrastructure bill to Biden’s desk.
“We have to have the full legislative text and the vote,” Progressive Caucus chair Rep. Pramila Jayapal (D-Wa.) told The Washington Post this week. “What I want is the two bills moving together at the same time.”
But the Senate isn’t working on the same timeline.