In one of the rarer cases of President Joe Biden pushing an agenda item that he actually discussed on the campaign trail, he’s preparing to roll out a bunch of tax increases that he wants the Democrats to push through congress. Chief among these is a significant increase in the corporate tax rate from 21% to 28%. This would supposedly be an example of making employers “pay their fair share” and the revenue would go toward paying for Biden’s massive infrastructure proposal along with the rest of his staggering tax-and-spend plans. But if he thought the plan was just going to sail through smoothly, he may have overestimated the existing support for such a measure. The Wall Street Journal reports this week that a number of House Democrats are already getting cold feet and looking for different ways to finance their ambitions. (Subscription required)
President Biden’s proposed tax increases on corporations as part of a $2.3 trillion infrastructure plan have drawn a skeptical reaction from some Democrats, who instead favor borrowing money to pay for the investments or raising other levies, like the gasoline tax, to do so.
The proposal would raise the corporate tax rate to 28% from 21% and increase taxes on companies’ foreign earnings. The White House said the tax increases would, over 15 years, cover the cost of the $2.3 trillion package, which puts money toward improving roads, bridges, and transit systems, along with expanding broadband access and myriad other efforts.
Republicans have widely rejected Mr. Biden’s proposed tax increases, but some Democrats are raising their own questions about the plan. With very narrow majorities in the House and Senate, Democrats will need nearly unanimous support in their party to advance the package without Republican votes, and many lawmakers are floating potential changes to the plan.
Nancy Pelosi is all in favor of Biden’s corporate tax hike as one might expect, but she’s also keenly aware that her majority margin in the House is now down to single digits. She’s going to have to do quite a bit of cat-herding to push that beast over the line and there are already signs of potential Democratic defectors making noises about not going along with the plan.
Congressman Peter DeFazio (D., Ore.), who chairs the House Transportation and Infrastructure Committee, has already gone on record saying that he doesn’t believe funding the infrastructure bill entirely through tax hikes is necessary. He would prefer some combination of an increase in the federal gas tax and “borrowing” more money to cover it. (There’s that magical money tree again.) Richard Neal (D., Mass.) has similarly said that he expects to see “changes” in the tax hikes made by the House.
Josh Gottheimer (D., N.J.) is quoted as saying that he doesn’t want to see a bill of this size forced through without at least some GOP support. He’s suggesting that his party look for “alternatives to the corporate tax increase” in order to bring some Republicans along. He and some other northeastern Democrats are suggesting that a new “mileage tax” paid by drivers of electric vehicles should be on the table. If nothing else, that would be a channel of revenue generated by people who are actually using the infrastructure that the bill is supposedly going to invest in.
Of course, no discussion of hesitant Democrats would be complete without checking in on King Joseph over on the Senate side, right? As you might expect, the current proposal is a non-starter for him also.
In a radio interview with @HoppyKercheval, Sen. Manchin signals there are circumstances under which he won’t vote to get onto the infrastructure bill.
“As the bill exists today, it needs to be changed,” Manchin says.
— Steven Portnoy (@stevenportnoy) April 5, 2021
The part that’s not being said aloud by many of these Democrats is that they’re very nervous about the idea of significantly hiking up the taxes paid by large corporations because those same corporations channel a lot of cash into political campaigns through various methods. Once you start biting the hand that feeds you, those contributions may begin drying up. There’s also the possibility of voter backlash if employers begin scaling back on hiring and benefits to make up for the additional revenue they lose to Uncle Sam.
The razor-thin margins the Democrats have in both chambers appear to be creating a trap for Chuck Schumer and Nancy Pelosi, along with Joe Biden as well. They can try to ram through all of these massive, budget-busting plans via reconciliation with no support from any Republicans and very likely suffer a beating at the polls next year like the one they experienced in 2010. Or they can significantly temper their expectations to gain some GOP support, but risk a revolt from the Squad and their own far-left flank. I’m sure that neither option is looking terribly appetizing at the moment.