Democrats offer competing tax ideas on Biden infrastructure

Congressional Democrats are debating how they should raise taxes to finance President Biden’s infrastructure plan, with minor disagreements emerging in the early stages.

The White House has proposed raising the corporate tax rate from 21 percent to 28 percent and increasing taxes on U.S. companies’ foreign earnings. But some Democratic lawmakers are pushing back on aspects of the tax proposals, while others have suggested ideas that diverge from the administration’s plans.

Reaching consensus on taxes will be among the top challenges for Democrats as they work to enact an infrastructure and jobs package in the coming months. Democrats will need to craft legislation that can get near-universal support in the party, since Republicans have signaled that they will oppose any measures that resemble the proposal Biden unveiled last week.

White House press secretary Jen Psaki said during Monday’s press briefing that Biden called for increasing the corporate tax rate to 28 percent because he “felt it was responsible to propose a way to pay for his proposal.” But she also said the administration expects there will be discussions with lawmakers about how to finance the package.

“There will be different ideas for tax proposals,” Psaki said. “That will all need to be weighed by a range of questions, including — with Congress and with leaders in Congress and outspoken members in Congress about whether it should be paid for, over what period of time, how much should be paid for, what the options are for paying for it.”

Biden is hoping to build on his first major legislative victory — a $1.9 trillion coronavirus relief package signed into law last month — with a roughly $2.25 trillion proposal focused on improving infrastructure and addressing climate change. The White House has suggested paying for the infrastructure legislation over 15 years by raising the corporate tax rate and making other changes to the tax code to increase the amount paid by multinational companies.

Administration officials have been discussing their plan with lawmakers, with Treasury Secretary Janet Yellen holding a briefing with House Democrats on Tuesday.

Republicans quickly said corporate tax increases are a non-starter for them, making the budget reconciliation process the likely legislative vehicle for Democrats so they can pass an infrastructure package with a simple majority vote in the Senate and avoid a GOP filibuster.

But even among Democrats, there is no consensus about how the infrastructure package will take shape. No legislative text has been released, and it’s likely to take at least several months for any legislation to be enacted.

However, there is broad consensus among Democrats that the corporate tax rate is too low. The rate was slashed from 35 percent to 21 percent under former President Trump’s 2017 tax cut law, which did not receive any Democratic votes.

Many Democrats have expressed support for Biden’s proposal to increase the corporate tax rate.

Rep. Don Beyer (D-Va.), chairman of the Joint Economic Committee, characterized the 28-percent figure as “a prudent compromise” that “moderates and progressives would be wise to support.” The GOP argument that U.S. businesses cannot compete globally at that rate, Beyer added, is contradicted by history.

“The rate was significantly higher from the post-WWII era until 2017, a timespan which included some of the most prosperous periods for the U.S. economy,” Beyer, also a member of the tax-writing Ways and Means Committee, said in an email.

Rep. Earl Blumenauer (D-Ore.), who previously championed raising the gas tax to pay for infrastructure, told The Hill that raising the corporate tax rate is a better option at this time.

“The gas tax is fast declining in its effectiveness and opposition is increasing,” he said in a statement Tuesday. “Using other sources, like adjusting the corporate tax rate, have greater promise of being enacted, restoring tax fairness, and generating the significant amount of money that is necessary to meet the needs of the American people.”

Sen. Joe Manchin (D-W.Va.) threw a curve ball into the discussions on Monday when he said that he thinks a 28 percent corporate tax rate is too high, and that he’d prefer a smaller increase, to 25 percent. Manchin’s support is necessary for any Democratic proposal in the 50-50 Senate.

It’s unclear how many other moderate Democrats will raise objections to Biden’s goal of a 28 percent corporate rate.

An aide to a centrist House Democratic member suggested Tuesday that, quite aside from the corporate tax hike, the overall size of Biden’s plan might alienate moderates. But the aide also predicted that Democrats would likely land on a corporate hike that the centrists could support.

“Whatever the price tag is, even if we’re talking about $1 trillion, you’re going to have to offset that in one way or another. Obviously, the corporate tax rate is going to be a part of it,” the aide said. “We’re still seeing what the possible will be, but with a recognition that a form of increase is probably likely and we’ll support it. I just don’t know if we’ll be willing to go as far as 28 [percent].”

The corporate tax rate isn’t the only tax component of Biden’s proposal that’s sparking competing ideas among Democrats.

Three Democrats on the Senate Finance Committee unveiled a framework Monday for raising taxes on multinational corporations that has some similarities to Biden’s proposal as well as some differences. For example, Biden has called for scrapping international provisions in Trump’s tax law that Senate Democrats are proposing to modify instead.

The Senate Democrats’ idea was designed with the goal of attracting support across the caucus. It was released by Senate Finance Committee Chairman Ron Wyden (Ore.), progressive Sen. Sherrod Brown (Ohio) and centrist Sen. Mark Warner (Va.).

“This is about getting all 50 Senate Democrats on board,” Wyden said on a call with reporters Monday.

He said his proposal is “built to become law” because it is designed to boost incentives for investment in the U.S. in addition to raising revenue, and because the plan uses existing systems, when possible, in an effort to keep it simple.

Some congressional progressives have said they think Biden’s infrastructure package should be larger. But that could require additional revenue raisers in the form of new or higher taxes if lawmakers want to fully pay for it.

Additionally, lawmakers and the White House will have to figure out how they want to address the demands of Democrats from high-tax states such as New York and New Jersey who want the infrastructure bill to undo the $10,000 cap on the state and local tax (SALT) deduction that was imposed by Trump’s 2017 law. Rolling back the cap on the deduction would add an additional cost to the infrastructure legislation.

A spokesperson for Rep. Thomas Suozzi (D-N.Y.) said Tuesday that the congressman “supports a big bold infrastructure plan and isn’t opposed to raising taxes on corporations and wealthy individuals” but wouldn’t support any deal that doesn’t address the SALT deduction cap.

House Ways and Means Committee Chairman Richard Neal (D-Mass.), whose panel will be key in writing the tax portion of infrastructure legislation, said during a press conference in his district last week that he thinks Congress will agree to some of Biden’s proposed funding ideas but put forth its own ideas as well.

“I think that Congress will offer some suggestions,” he said. “We will accept some of what he is proposing, but I also think timing here is a critical issue.”

Mike Lillis contributed.