Washington is gearing up for a battle over raising taxes as President Biden looks for a way to pay for his agenda while Republicans are planning to dig in their heels ahead of the 2022 elections.
Biden last week signed a $1.9 trillion coronavirus relief package that was mostly deficit-financed. The White House and congressional Democrats are now turning their attention to another economic recovery package, possibly focused on infrastructure, jobs and climate change. A key question will include if and how to pay for such a proposal.
Biden proposed a slew of tax increases during his presidential campaign that are expected to be on the table as part of the discussions. But they will face fierce opposition from Republicans and business groups, jeopardizing any attempt to pass an economic package on a bipartisan basis.
White House press secretary Jen Psaki said Monday that there isn’t a proposed package yet and also noted that Biden is committed to his campaign pledge to not raise taxes on people making under $400,000 annually. She said that the president’s focus on taxes is ensuring that wealthy people and corporations pay their “fair share.”
“That remains his overarching approach, but there isn’t a package yet where we’re talking about pay-fors yet,” she said. “I expect we can have more conversations about that down the road.”
Biden has said that he wants to follow up his relief package with legislation aimed at improving the economy so that it is in a stronger position than it was prior to the coronavirus-related downturn.
The president said in January that he was willing to increase the deficit substantially for his relief package, but also pointed out he wanted to pay for “permanent investments” by raising taxes on wealthy people and corporations.
Biden’s campaign tax proposals included raising the corporate tax rate from 21 percent to 28 percent, as well as raising the top individual income tax rate and the capital gains tax rate for high-income taxpayers. Bloomberg News reported Monday that these and other Biden campaign proposals are being considered by the White House as ways to help pay for an economic recovery plan.
It’s unclear exactly what spending will be included in the next economic package, though infrastructure spending is expected to be a main component. It’s also unclear what procedures Democrats will use to move the legislation through Congress.
Democrats used the budget reconciliation process to pass the coronavirus relief package, and the measure received no Republican votes. Yet, some Democrats are hoping to pursue an infrastructure and jobs bill on a bipartisan basis.
“Building on the popularity of the American Rescue Plan, it is my sincere hope that our Republican colleagues will join us at the negotiating table, so together, we can deliver a package that benefits all our constituents,” House Ways and Means Committee Chairman Richard Neal (D-Mass.) said in a statement Friday.
Sen. Ben Cardin (D-Md.) said in comments caught on a “hot mic” Monday at an event with Transportation Secretary Pete Buttigieg that most likely an infrastructure package would have to move through Congress via budget reconciliation, which would mean it could pass the Senate with a simple majority vote.
Senate Democrats in 2018 proposed rolling back former President Trump’s 2017 tax cuts to pay for an infrastructure plan.
Tax increases face stiff opposition from Republicans, which means that Democrats would have to pursue an infrastructure bill on their own if they wanted to pay for it that way. One of the major provisions in the 2017 tax law championed by Republicans was a reduction in the corporate tax rate from 35 percent to 21 percent.
“In the next package, we’re going to see real serious tax increases on the corporate side, certainly which will drive us to the least competitive tax rate in the world,” Rep. Kevin Brady (Texas), the top Republican on the House Ways and Means Committee, said on CNBC on Monday.
The tax increases would “have an impact on the economy, jobs and wages,” Brady added.
Anti-tax advocate Grover Norquist, the president of Americans for Tax Reform, predicted that “there will be no Republican votes for the president’s tax increases.”
Norquist argued that Biden’s campaign tax proposals could hurt people’s 401(k) retirement accounts, which could be a political problem for Democrats.
“You can’t talk to suburban moms and dads by raising their taxes and raising taxes on the companies they invest in,” he said.
The business community, which lobbied for Trump’s business tax cuts, is also expected to push back against rolling back those tax cuts to pay for an infrastructure bill.
Ed Mortimer, vice president of transportation and infrastructure at the U.S. Chamber of Commerce, said it would be ideal for an infrastructure bill to be bipartisan, and the opportunity for bipartisanship is lost if Democrats seek to pay for new spending by undoing Trump’s tax cuts.
“There are a lot of ways to pay for infrastructure without doing it,” he said.
The Chamber has long been supportive of raising the federal gas tax, and also supports incentives to encourage supplemental private investment in infrastructure. However, the Biden administration has said it doesn’t support a gas tax increase. Some Republicans have expressed interest in transitioning from fuel taxes to a vehicle miles traveled fee to fund infrastructure, but such a fee is unlikely to be implemented on a broad basis in the short term.
If Democrats pursue an infrastructure package on a partisan basis, they will need every Senate Democrat and almost every House Democrat to support the bill. That could be a challenge, because some centrist Democrats have expressed reservations about raising taxes during an economic downturn.
However, some key Democrats have pushed back on Republicans’ criticisms about raising taxes on the wealthy and corporations to pay for infrastructure.
“Billionaires and mega-corporations have never done better, and ensuring they pay their fair share is critical to funding long-overdue investments in rebuilding our roads and bridges and transitioning to a carbon-free future,” Senate Finance Committee Chairman Ron Wyden (D-Ore.) said Monday in a statement to The Hill.
Treasury Secretary Janet Yellen said in written responses following her confirmation hearing in January that the investments in infrastructure and worker training that Biden wants to pair a corporate tax increase that “would benefit American businesses of all stripes and improve our international competitiveness.”
Yellen is also working with other countries in the Organization for Economic Cooperation and Development to reach a deal on a global minimum tax for corporations, which she thinks would help to keep U.S. businesses globally competitive.
Progressives argue that paying for infrastructure through tax increases on the wealthy and corporations would be smart politics, pointing to polling that shows that the public favors these types of tax hikes.
“If Biden were to put forward a major investment package that was financed by taxing the wealthy and corporations, there’s a good chance it would have as much popular support as his pandemic relief proposal,” said Frank Clemente of Americans for Tax Fairness, which is a left-leaning advocacy group.