Democrats tangle over tax hikes
Key lawmakers reluctant to embrace Biden plan
WASHINGTON – President Joe Biden has a simple message for fellow Democrats about his plan to raise taxes to remake large swaths of the American economy: look beyond the bottom line.
Biden is trying to persuade Democrats to embrace a more emotional argument, namely that the plan is fair, that it increases taxes on those who can afford to pay more and spends money on programs targeting children and the middle class.
The president has proposed more than $3 trillion worth of revenue increases, primarily through higher taxes for corporations and the country’s richest households as well as greater IRS enforcement that would target the wealthy. But key lawmakers voiced doubts this past week about the size and possible impacts on the economy as congressional committees considered the measures and a wide array of business groups sifted through the details to highlight what they oppose.
Interviews with three administration officials suggest the White House is comfortable with settling for a lower price tag as part of the negotiating process, as long as the end result produces a tax system that voters judge as fair. The officials, who were not authorized to publicly discuss ongoing negotiations and spoke on condition of anonymity, said Democrats are united on this front.
If the playbook of appealing to voters sounds familiar, it was the same strategy used by Biden to cement a bipartisan infrastructure deal earlier this year.
“This is a commonsense thing that people agree with,” said Kate Berner, White House deputy communications director. “They don’t understand why companies can park profits overseas and pay no money in taxes. They don’t understand why a hedge fund manager pays a lower tax rate than a pipefitter. It’s something that people think of as fundamentally broken.”
But in a sign of uncertainty, the administration has also stayed publicly quiet about how low Biden is willing to go in slimming down the package. The administration also finds itself grappling with interest groups that the White House views as intentionally misrepresenting its tax plans in hopes of eroding support. Officials say that claims of job losses by the U.S. Chamber of Commerce and other groups are overblown and fail to consider investments in family leave, children, child care, health care and the environment that they believe will help the economy.
The president outlined his tax plans in his budget proposal, setting a baseline for congressional committees. But some Democratic lawmakers, including West Virginia Sen. Joe Manchin, have already objected to the amount of spending and the taxes being raised. Manchin early on raised concerns about Biden’s proposal to increase the corporate income tax rate from 21% to 28%.
“If you’re going to be a leader in the world and the superpower of the world, you better have a competitive tax rate, period,” he said.
While Manchin and Sen. Kyrsten Sinema, D-arizona, both voted for the budget blueprint that allowed Democrats to begin crafting the social programs package, they have made it clear they will not support the proposed topline spending figure of $3.5 trillion over 10 years.
“Establishing an artificial $3.5 trillion spending number and then reverseengineering the partisan social priorities that should be funded isn’t how you make good policy,” Manchin wrote in The Wall Street Journal.
On the House side, Democrats can afford to lose only three votes and still pass the spending bill if the GOP unanimously opposes it, as expected. There have already been early signals of unrest, with Rep. Stephanie Murphy, Dflorida, voting against two sections of her party’s bill during a committee hearing this past week, and Rep. Ron Kind, D-wisconsin, joining her in voting no on one of those votes.
Under Biden’s initial proposal, changes to corporate taxes would raise roughly $2 trillion over a decade, with about 70% of that sum coming from putting the corporate rate at 28% and revising a global minimum tax on profits. An additional $755 billion would come from higher individual taxes on the wealthiest Americans, including an increase to the rate charged on profits from the sale of capital assets such as stocks or real estate.
Increased enforcement by the IRS would yield roughly $460 billion. But a Treasury Department analysis indicates that figure would grow to $1.6 trillion in the following decade as more IRS employees were fully trained, one of the key arguments for saying that the budget would be fiscally responsible.
Part of the challenge for Democrats is the memory of voter backlash against proposed tax increases during the 1984 presidential election against Ronald Reagan nearly four decades ago.
Many older Democrats and those from more conservative areas fear that voters will penalize them if taxes increase by too much, even if Biden and advocacy groups push the argument that voters are now rejecting Reaganism
and will reward Democrats for raising taxes on companies and the wealthy.
“We’re in a generational struggle within the Democratic Party,” said Frank Clemente, executive director of the advocacy group Americans for Tax Fairness. “We’re in a very different era, and these Democrats haven’t caught up with the era we’re in.”
Americans for Tax Fairness is among the organizations trying to persuade Democratic lawmakers to back Biden’s tax proposals. The groups have commissioned a national poll and six battleground state polls and mobilized 97 national groups and 620 state organizations to back the plans on the premise that they are popular.
The Retail Industry Leaders Association, whose members include Target, Best Buy and other major retailers, urged congressional leaders Thursday not to raise corporate tax rates, but to boost IRS enforcement and ensure that all companies pay at least a minimum tax before an increase in the corporate tax rate is considered.
“We are doing a lot of meetings educating members on this issue and making sure they understand how a rate increase will harm retail and the importance of ensuring all profitable companies contribute,” said Melissa Murdock, a vice president with the trade group.