Democrats tackling flash points of taxes, health, climate

Congressional Democrats face a daunting assignment

Via AP news wire
Saturday 18 September 2021 05:34
Congress Budget
Congress Budget

Revamp the tax code and important federal health care and environment programs. Spend $3.5 trillion over 10 years, but maybe a lot less. Ensure that no more than three Democrats in all of Congress vote “no” because Republicans will be unanimously opposed.

Try to finish within the next couple of weeks. And oh yes: Failure means President Joe Biden s own party will have repudiated him on the cornerstone of his domestic agenda.

That's what congressional Democrats face as they try writing a final version of a massive bill bolstering the social safety net and strengthening efforts to tame climate change. Here's a guide to pivotal differences they must resolve:

PRICE TAG

After weeks of negotiations, the White House and top Democrats compromised on a $3.5 trillion, 10-year cost for the bill. That's a huge sum, though a fraction of the $61 trillion the government is already slated to spend over that period.

But moderates led by Sens. Joe Manchin of West Virginia and Kyrsten Sinema of Arizona have said $3.5 trillion is too expensive, and votes from every Democrat in the 50-50 Senate are mandatory for success. Biden, House Speaker Nancy Pelosi D-Calif., and Senate Majority Leader Chuck Schumer, D-N.Y., have recently acknowledged what seems inevitable to many: The final cost may have to drop.

Manchin has suggested limiting the total to $1 trillion to $1.5 trillion, which progressives reject as paltry. Liberals led by Senate Budget Committee Chairman Bernie Sanders I-Vt., initially said at least $6 trillion was needed for serious efforts to help families and curb global warming.

Eventually a compromise will be reached, with some expecting it in the $2 trillion to $2.5 trillion range. But since House committees just finished crafting a $3.5 trillion version of the package, a smaller price tag means some Democratic priorities would have to be trimmed.

TAXES

To pay for much of the bill, the House Ways and Means Committee approved $2.1 trillion in tax boosts, mostly on the rich and corporations. But some details and numbers seem likely to change.

Biden, who's promised to not raise taxes on people earning under $400,000, will probably get his proposal to raise the top individual income tax rate on the richest Americans to 39.6%. That would be up from the 37% approved under former President Donald Trump.

But Democrats also want to raise other levies on the wealthiest, and it's unclear which will survive and in what form.

For example, Senate Finance Committee Chairman Ron Wyden, D-Ore., has expressed interest in boosting taxes on the value of some large estates that heirs inherit. Ways and Means Chairman Richard Neal, D-Mass., omitted that proposal from his panel's plan.

In addition, Democrats want to provide popular tax credits for children, health care and child care costs and many low-income workers. Should the size of the overall bill shrink, Democrats might have to save money by delaying, gradually phasing in or out or limiting some of those breaks. Some moderates say a proposed tax credit for buying electric vehicles shouldn't go to higher-earning people.

Biden wants to raise the 21% corporate tax rate to 28% but may have to settle for around 25%. Democrats face other differences over taxes on corporate foreign income and stock buybacks.

MEDICARE

Three moderate Democrats blocked a House committee from approving a top priority for Biden and progressives: saving hundreds of billions by letting Medicare negotiate lower prices for pharmaceuticals it buys. Another committee approved the language, so it's not dead.

Still, the plan is strongly opposed by drug manufacturers and some moderates want to water it down. A less aggressive measure could emerge.

Democrats planned to use the savings to pay for another progressive goal: expanding Medicare to cover dental, vision and hearing benefits. If the drug-pricing language is diluted and produces less savings, it's unclear how the Medicare expansion would be financed.

SALT AND IRS

In a town that loves acronyms, SALT, shorthand for state and local taxes, is on the table.

Democrats from high-tax coastal communities are demanding an increase in the current $10,000 limit on deductions taxpayers can claim for state and local taxes they pay. In a chamber where Pelosi can lose no more than three Democratic votes, they have leverage.

To ensure their support, many think that deduction ceiling will be increased. To make up for the lost revenue, the IRS could be given extra money or banks might be required to report more financial transaction information to the IRS, ideas aimed at bolstering tax collections.

TIMING

Last month, Pelosi told moderate Democrats that the House would consider their top priority, a separate $1 trillion bill financing road and other infrastructure projects, by Sept. 27.

In what seems a mutual political suicide pact, progressives have threatened to vote against that bill unless moderates are supporting the $3.5 trillion package, which liberals treasure. Ideally, Democratic leaders would love for both bills to be voted on together.

But with so many loose ends, it seems highly unlikely the larger, social and environment measure will be finished then. That's raised questions about how Pelosi will keep her party's antagonistic wings supportive of each other's priority bills and how she will shepherd the two measures to passage.

DEMOCRATS' SECRET WEAPONS

Democrats have two things going for them.

For one thing, a collapse of the effort would mean a jarring failure to enact their highest priorities, weakening their bid to retain their congressional majorities in next year's elections. Every Democrat knows that.

Another is Pelosi herself, who's proven deft at holding Democrats together and squeezing out the votes she needs.

House Budget Committee Chairman John Yarmuth, D-Ky., summed up the two factors in an interview last week, describing what he tells Democrats.

“I’ve said everybody should be posturing and doing the best you can to stand up for your priorities, but in the final analysis you’re going to vote for this thing," Yarmuth said. “And by the way, have you met Nancy Pelosi?”