Could Democrats Blow Up Biden’s Tax Plans?

By Yuval Rosenberg

Could Democrats Blow Up Biden’s Tax Plans?

As President Joe Biden works to court lawmakers and win support
for his $4 trillion in tax and spending proposals, most of the
speculation has been about whether he can find common ground with
Republicans on an infrastructure deal. But Biden’s tax plans are
also meeting some resistance among Democrats, especially those
worried about being tarred as tax hikers ahead of the midterm
elections.

Sen. Joe Manchin (D-WV) and other moderate Democrats have
already pushed back on Biden’s plan to raise the corporate tax rate
from 21% to 28%, saying they prefer a 25% rate instead. Other
Democrats have insisted that they won’t support any package unless
it includes a repeal of the $10,000 cap on the deductibility of
state and local taxes. But as The Washington Post’s Jeff Stein and
Tyler Pager
report, the Democratic concerns are broader than
that:

“Pockets of skepticism have emerged within Biden’s party over
White House plans to raise the corporate tax rate, revamp the
international tax system and double tax rates on wealthy investors,
among other measures critical to the administration’s plans. The
party faces regional divides over taxes as well, with farm-state
Democrats skittish about taxes on heirs and coastal Democrats
demanding the repeal of limits on state and local tax deductions,
which would amount to an expensive tax cut that would require
higher taxes elsewhere….
“The open-ended nature of the discussions has led to a bevy of
ideas from Democrats and little clear progress toward a resolution.
Democrats said some donors are anxious about the political
ramifications of raising taxes before the midterms, especially
given the party’s tough odds to hold onto the House. Rep. Sean
Maloney (D-N.Y.), chair of the Democratic Congressional Campaign
Committee responsible for party fundraising, has privately warned
the tax plans could hurt vulnerable House Democrats up for
reelection in 2022, said two people familiar with the matter, who
spoke on the condition of anonymity to discuss internal
matters.”

The concerns could be an obstacle if Democrats look to pass
Biden’s plans without Republican support, since they would need
nearly every member of their narrow majority in the House and all
50 Democratic senators to back their bills, giving individual
lawmakers extraordinary leverage over the details of the
legislation.

But tax hikes on the rich and corporations are popular:
At the same time, as liberal Washington Post columnist Paul Waldman
writes, poll after poll has found widespread public support for tax
increases on the rich and corporations, the kinds of hikes that
Biden has proposed. “Let’s be clear: There is almost nothing
in either party’s policy agenda that is more popular than raising
taxes on the wealthy,” Waldman notes, adding that, “the truth is
that whatever you think about the fiscal wisdom of raising taxes on
the wealthy, there is simply no doubt that it’s a political winner
and always has been.”

The White House is well aware of that. “The administration knows
these taxes are very popular,” Celinda Lake, a Democratic pollster
who advised Biden’s campaign, told the Post. “But Democrats in
Congress are nervous from decades about being attacked as tax and
spenders.”

Some Democrats open to more deficit spending: As some
Democrats eye changes to Biden’s tax proposals that could leave
hundreds of billions of new spending unpaid for, other members of
the party have suggested that lawmakers shouldn’t be too concerned
about fully offsetting the costs of their new plans. “The whole
point is that we are making generational investments that will
provide value for 30 or 50 or 100 years. With interest rates at a
historic low, it makes sense to pay for these initiatives over a
longer period of time,” Sen. Brian Schatz (D-HI) told the Post.

Biden has said that he was “not willing to deficit spend” to pay
for permanent new programs, but as Stein and Pager write, the
“congressional and political realities stand to pose a test of
Biden’s aspirations to fiscal responsibility.”


Read the full story at The Washington Post.

Number of the Day: 8.1 Million

Available job openings rose to a record 8.1 million in
March, the Labor Department said Tuesday. The previous high of 7.6
million was set in November 2018, in data that go back to 2000.
“Employers are looking to hire, but temporary factors are making
people a little hesitant to take jobs,” Nick Bunker, an economist
at Indeed, told
The Wall Street Journal.

Republicans Take Aim at Pandemic Unemployment Benefits

The political war over unemployment benefits continued Tuesday
as a group of 10 GOP senators led by Sen. Roger Marshall of Kansas
introduced a bill that would phase out supplemental unemployment
payments by the end of June. Under current law, the $300 per week
payments, which are provided in addition to state benefits, are
scheduled to last until September 6.

Republicans claim that the extra benefits are allowing Americans
to remain unemployed longer than they would otherwise and blame the
program for the disappointing April jobs numbers. Marshall
told Forbes that Congress should “not be in the
business of creating lucrative government dependency” that makes it
“more beneficial to stay unemployed rather than return to
work.”

The GOP bill, which would reduce the federal unemployment
benefit to $150 a week at the end of May and eliminate it
altogether a month later, is similar to plans announced by
Republican governors in a number of states including Iowa, Montana,
South Carolina and Tennessee to phase out the federal program
within their states.

South Carolina Gov. Henry McMaster said Monday that the payments
were damaging his state’s economy. “We’ve got help-wanted signs up
everywhere, we get calls and letters, and texts from all sorts of
businesses all across the state looking for people to work,”
McMaster
told Fox News’s Tucker Carlson. “People won’t come
to work because they’re getting as much money or more in some cases
by staying home.” McMaster also warned darkly that the program “is
about as close to socialism that I’ve seen.”

A more complex story: While many Republican lawmakers and
small business owners see the federal unemployment program as a
serious problem that is weighing on the economic recovery, others
aren’t so sure. Speaking at a conference Tuesday, Federal Reserve
Governor Lael Brainard described some of the many factors that are
holding back the economy, including fears of illness, a computer
chip shortage, uneven school reopenings, a lack of day care options
for parents and a hesitancy to get the vaccine in some parts of the
population.

Brainard said that she doubted that the federal unemployment
payments were a big part of the problem. “That story just doesn't
make as much sense to me,” she said, noting that job growth was
relatively robust in the leisure sector in April, and that
continuing unemployment claims were falling. “People want to go
back to work, they’re willing to do that,” Brainard said. “The big
question for many is just whether those virus-related and in-person
school related impediments are standing in the way.”

Notes from a beach town: The economy of Rehoboth Beach,
Delaware, provides some lessons on the unusual course of the
recovery so far. According to a
report Tuesday by Jeanna Smialek and Jim
Tankersley of The New York Times, the beach town is ready to reopen
as vacation season heats up, but finding workers is a serious
problem for the many bars and restaurants in town. However, the
issue doesn’t seem to be the higher-than-usual level of
unemployment benefits.

Instead, local business owners told Smialek and Tankersley that
the pandemic seems to have fundamentally changed the nature of the
labor pool. “There’s no labor out there,” one real estate developer
told them. “It’s not even a question of, are you paying enough
money?” Some people are afraid to return to work amid the pandemic,
while others have changed industries or are searching for something
new.

At some Wawa convenience stores in Delaware, workers are getting
free hoagies as an enticement. At the Dogfish Head brewpub in
Rehoboth Beach, new workers are being rewarded with cases of beer.
But substantial increases in pay don’t seem to be a big part of the
equation. While some restaurants have bumped base pay up from $9 an
hour to $12, there is a reluctance to go too far with wage
increases.

“Many managers are unwilling to raise wages and prices enough to
keep up, as they worry that demand will ebb in a few months and
leave them with permanently higher payroll costs,” Smialek and
Tankersley write. “They are instead resorting to short-term fixes,
like cutting hours, instituting sales quotas and offering signing
bonuses to get people in the door.”

GOP bill unlikely to pass: No matter how the jobs
situation plays out in the coming weeks, the Republican bill in the
Senate is not expected to pass. Democratic Sen. Ron Wyden of
Oregon, who backed the benefits, told Forbes he would oppose the
GOP effort. “To take every penny from vulnerable people, many of
them women, is just plain wrong,” Wyden said. “And I’m going to
fight it every step of the way.”

Still, some Democrats seem open to the idea. Saying he has
heard complaints from business owners, Sen. Tom Carper of Delaware
said he would take a look at the Republican proposal. And Sen. Jon
Tester of Montana said that he thinks the problem is regional in
nature, and that he supports his state’s decision to end the
payments early.

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