Dems’ Mad Dash to Finish Tax and Spending Plan

U.S. Senator Joe Manchin (D-WV) is interviewed by David Rubenstein
LEAH MILLIS
By Yuval Rosenberg

Dems’ Mad Dash to Finish Tax and
Spending Plans

As Democrats raced frantically Tuesday to finish negotiations
over their trillion-dollar-plus social spending package, party
leaders said they were very close to reaching an agreement.

House Speaker Nancy Pelosi (D-CA) reportedly told fellow
Democrats Tuesday morning that they were on “the verge of something
major” and described the legislation as “transformative, historic
and bigger than anything else.”

Pelosi indicated that lawmakers should be done in a matter of
days if not hours, saying “there’s not that much more time — we
have to have decisions largely today, a little bit into tomorrow,
so we can proceed.”

Behind the scenes, however, lawmakers are still debating major
points in the bill, raising questions about how close to being
finished negotiators really are.

The most powerful man in Washington? Sen. Joe Manchin
(D-WV) remains a central figure in the negotiations. His insistence
on a smaller bill is having a powerful effect, with the latest
estimate for the total cost of the spending bill now at $1.75
trillion over 10 years — much closer to $1.5 trillion Manchin says
is his upper limit than the $3.5 trillion Democrats were aiming for
just a few weeks ago.

Manchin is also reportedly still expressing concerns if not
downright opposition to basic provisions including the expansion of
Medicaid in 12 states that have not yet done so; the expansion of
Medicare to include dental, vision and hearing benefits; and a fee
on methane emissions that would affect coal mining operations his
home state of West Virginia.

Manchin is clearly aware that his positions place him at the
very edge of his party, if not outside it. “I’m totally out of sync
with 48 other Democrats,” Manchin reportedly said at a dinner with
reporters Monday night. “I love them all. And I love all the
Republicans. So I’m just trying to survive in a very, very, very
divided Congress in a very divided country.”

Sanders pushes back: Sen. Bernie Sanders (I-VT) appeared
to draw his own red line on a pair of health care issues Tuesday,
raising more questions about whether Democrats really will be able
to seal an agreement.

Contradicting Manchin and Sen. Kyrsten Sinema (D-AZ), Sanders
defended the inclusion of drug-pricing power and Medicare expansion
in the bill. “Bottom line is that any reconciliation bill must
include serious negotiations of Medicare and the pharmaceutical
industry to lower the cost of prescription drugs, and a serious
reconciliation bill must include expanding Medicare to cover
dental, hearing aids and vision,” Sanders told reporters.

Senate Majority Leader Chuck Schumer (D-NY) told reporters that
the issues cited by Sanders are still unsettled as of Tuesday
afternoon, but also that he was still optimistic they could be
resolved. “I believe a final deal is within reach,” he said. “We're
moving toward finding sweet spots in every one of these disputed
issues.”

Billionaire tax in question: In the last few days
Democrats seemed to embrace a proposed tax on billionaires’
unrealized capital gains — a last-minute replacement for an
increase in tax rates on corporations and high-income households
that has been rejected by Sinema. That alternative plan came into
question Tuesday, with some House Democrats saying it is too
complicated.

“There are 20 other better ways and more workable ways to get
the wealthy to pay their fair share than what feels to me like a
[public relations] initiative,” Rep. Jim Himes (D-CT) said.

House Ways and Means Committee chair Rep. Richard Neal (D-MA)
reportedly said that implementing the proposed billionaire tax plan
would be “a bit more challenging” than the plan previously offered
by the committee. Under the House plan, the top individual income
tax rate would rise from 37% to 39.6% and the corporate rate would
climb from 21% to 26.5%.

“Our plan looks better every day,” Neal said. There is no
indication, though, that Sinema has changed her mind on the issue,
leaving Democrats scrambling for other options.

IRS plan in doubt, too: Manchin on Tuesday raised fresh
doubts about another key revenue raiser in the Democratic plan. In
an interview with the Economic Club of Washington, D.C., he

slammed a proposal to require banks to report more
account information to the Internal Revenue Service, an idea meant
to help the agency crack down on wealthy tax cheats. Democrats had
initially proposed that the reporting requirement would apply to
accounts with withdrawals and deposits totaling more than $600, but
they recently raised that threshold to $10,000 a year after facing
sharp pushback. Manchin remains opposed, though. “This cannot
happen. It’s screwed up,” the senator said he told President Biden.
He also predicted that the reporting requirement is “going to be
gone.”

Corporate tax in play: Senate Finance Committee Chairman
Ron Wyden (D-OR) released a bill Tuesday that would impose a
minimum tax rate of 15% on companies with more than $1 billion in
profits. The bill, which is also sponsored by Sens. Elizabeth
Warren (D-MA) and Angus King (I-ME), would affect about 200
companies, some of which have gained notoriety for failing to pay
income taxes in recent years, and raise hundreds of billions of
dollars over 10 years. Notably, Sinema expressed support for the
proposal in a tweet Tuesday afternoon.

Climate could be biggest part of the bill: The White
reportedly believes that climate-related parts of the spending bill
are mostly settled, and will likely total more than $500 billion,
Axios’s Alayna Treene
reports.

Although Manchin successfully lobbied to remove a program that
would pay electric companies to clean up their energy sources, the
bill still contains many other initiatives, including billions in
grants and tax credits for companies and individuals to expand
their use of green energy sources.

If that $500 billion figure holds, it would mean that
spending on climate initiatives could well be the largest single
component of the Democratic bill. “This will be, just as a matter
of fact, the biggest climate bill in human history,” Sen. Brian
Schatz (D-HI) told Axios. “At least a half a trillion
dollars.”

Quote of the Day

“There are realities of governing and realities of
policymaking, including the fact that the alternative to what is
being negotiated is not the original package; it is nothing. So,
what we're really facing right now is a question of whether people
are going to support the largest investment in climate and clean
energy. Do they want to be a part of the largest investment in
early childhood education in history? Do they want to make health
care more affordable and accessible? Or do they want to let the
perfect be the enemy of the historic?”

– White House Press Secretary Jen Psaki, who again
acknowledged at a press briefing Tuesday that President Biden won’t
get everything he wants in Democrats’ budget reconciliation bill,
urging lawmakers to support the emerging package.

How Democrats Might End Up Providing a Tax Cut to the Rich

As Democrats continue to debate various tax plans that could
raise revenue for their Build Back Better economic agenda, the
Committee for a Responsible Federal Budget warns in an
analysis published on Tuesday that, depending on
the final details, the proposals could wind up cutting taxes on the
rich for at least a couple of years.

That surprising outcome would largely be the result of a
proposal to repeal the $10,000 cap on the deductibility of state
and local taxes (SALT). CRFB acknowledges that its analysis is
highly speculative given that details of the Democratic tax plan
are still very much in flux. “However,” the group says, “the
rumored two-year
SALT cap repeal would represent a roughly $70
billion tax cut for the top 5 percent of earners in 2023. Lawmakers
may have a hard time counteracting such a large tax cut with other
tax increases.”

The budget watchdog group concludes that the
Democratic plan would likely still result in a tax hike for
billionaires, who would see the benefit of a SALT cap repeal
outweighed by proposed corporate tax changes and mark-to-market
taxation of their capital gains.

The group also projects that the Democratic plan would
“almost certainly” raise taxes on high earners after the first two
years — but that assumes that any temporary repeal of the SALT cap
is allowed to expire. “Unfortunately,” CRFB says, “we expect a
2-year repeal of the SALT cap would be followed by an aggressive
effort to make that repeal permanent, at an additional cost of

roughly $100 billion per year.”

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