Tuesday was a day of deep uncertainty. A proposed tax on billionaires ran into criticism for being cumbersome and worse. This is causing policy priorities to be reduced, or even eliminated, from paid family leave to child support to senior dental, vision, and hearing aid benefits.
The once-stout climate change strategies are also losing some weight. Instead of focusing on punitive measures against polluters, they will be rewarded with clean energy incentives.
Tensions mounting, Biden met Tuesday night with two holdout Democrats — Sens. According to an anonymous source, Joe Manchin from West Virginia and Kyrsten Silena from Arizona met with Biden Tuesday evening. President Obama is trying to reach an agreement before he leaves for the global summits later in the week.
Biden’s package is still a significant undertaking. It could still surpass $2 trillion, making it the largest congressional effort in decades. It’s still far smaller than what the president and his party originally envisioned.
According to another source, Nancy Pelosi, House Speaker, told lawmakers that they were about to embark on “something major, transformative and historic” which is bigger than any other attempt at Congress.
After a meeting at the White House with Biden, Rep. Joyce Beatty (D-Ohio), said that “we know we are close”. “And let’s be clear: We have left footprints and fingerprints on this.”
There are still vast differences between Democrats over the basic contours and tax revenue required to fund the proposal.
Jen Psaki, White House press secretary, stated that Biden still desired to have a deal to show foreign leaders that the U.S. government is performing well on climate change. She acknowledged that this might not be possible, and forced him to continue working on the package remotely.
She cautioned against compromise and failure
She stated that “the alternative to what is being negociated is not the original package.” It is nothing.
On Tuesday, more lawmakers travelled to the White House to negotiate and came away feeling positive that the final product would be substantial, despite all the changes and reductions Manchin and Sinema forced upon them.
The two senators together have a powerful one-two punch. Manchin has forced supporters to cut back on health care, child support, and other spending. Sinema has caused Democrats to reconsider their plans for reversing Trump’s tax cuts for corporations and the wealthy.
Biden insists that all new spending will be fully funded and not added to the national debt. Biden promises that any new taxes will only be imposed on the wealthy. This means those who earn more than $400,000 per year or $450,000 per couple. He also says corporations must stop skipping taxes and pay their fair share.
After Sinema opposed her party’s original proposal to increase tax rates on the wealthy and corporations, the White House had difficulty rethinking its tax strategy. Biden, with a 50-50 Senate vote, has no votes left in his party.
To win over Sinema, and other Democrats, Democrats were ready to announce a new plan to tax billionaire assets. Sinema supported their Tuesday proposal, which would have required corporations earning more than $1 million to pay a 15% minimum income tax.
“Here’s what it boils down to: Americans have read that billionaires pay little or no tax for years, and this is the truth,” stated Sen. Ron Wyden, Oregon, who heads the Senate Finance Committee.
Wyden’s plan to tax billionaires would only affect the richest Americans. It will impact less than 1000 people. It would apply to those who have assets exceeding $1 billion or three years of consecutive income exceeding $100 million.
Similar billionaires would apply a similar tax to non-tradeable assets such as real estate. However, the tax would not be assessed until the asset was sold.
Although the billionaires’ tax rate was not yet set, it was expected that it would be at least 20% for capital gains. Democrats claim it could generate $200 billion in revenue, which could be used to fund Biden’s package for 10 years.
Republicans despise the tax on billionaires and some suggest it might be challenged in court.
Key Democratic colleagues raised concerns about the billionaires’ tax as well, saying that the idea of simply undoing 2017’s tax cuts and increasing top rates was simpler and more transparent.
Richard Neal (D-Mass.), the chairman of Ways and Means Committee said that “our plan looks better each day.”
The bill passed by Neal’s panel would see the highest individual income tax rate rise from 37% – 39.6% for those who earn more than $400,000 or $450,000 for couples. The corporate rate would rise from 21% to 26.5%. A 3% surtax of $5 million or more per year for the richest Americans is also proposed in the bill.
Manchin is less concerned about the new taxes and instead forces his party to reconsider expanding health, child care, climate change programs that he considers unnecessary or costly government entitlements.
Plans to increase Medicare coverage with vision, hearing, and dental benefits for seniors; child assistance; free prekindergarten; new program of paid four-weeks family leave; and a plan that is more limited than originally planned to lower prescription drug prices are still under discussion.
Coal-state Senator Manchin rejected Biden’s previous clean energy strategy because it was too harsh on those who rely on fossil fuels. Instead, the White House proposed a plan to increase grants and loans to encourage clean energy sources.
Manchin’s resistance could stop one more tax idea, a plan to give IRS more resources for tax scofflaws. Biden said that he had told him during their weekend meeting in Delaware that the plan was “failed” and that the government could monitor bank accounts.
Democrats hope to reach an agreement this week, opening the door for a House vote in favor of a $1 trillion bipartisan infrastructure bill. This will allow routine transportation funds to expire Sunday. The separate bill for roads and bridges was blocked by progressive lawmakers who refused to support it, until the deliberations on a larger Biden bill were completed.
