Sept. 15 (Reuters) – Democrats are crafting a massive $ 3.5 trillion spending package that would transform the U.S. economy by investing in free community colleges, child care and green energy, funded by price hikes. taxes on wealthier and larger companies.
The drafters of the bill must balance the campaign pledges of the Biden White House and the party’s progressives and moderates, while addressing lawmakers empowered by the very slim majorities of Democrats in Congress to demand animal concessions from company.
Faced with a unified Republican opposition, Democrats will have to pass the bill along strict party lines using a legislative tool called budget reconciliation. They cannot afford to lose even one vote in the Senate and more than three votes in the House of Representatives.
Here are the main flash points:
WHAT IS THE SIZE, ANYWAY? The Biden administration spends $ 3.5 trillion in spending over 10 years, but some moderate Democrats, including Representative Stephanie Murphy of Florida, are balk at its price and how it would be financed.
US Senator Joe Manchin, a Democrat from West Virginia, and Kyrsten Sinema of Arizona, have adamantly refused to back a $ 3.5 trillion package, siding with Republicans who universally say it is too big .
Manchin won’t say what size of budget he can take, making him one of the biggest kingmakers in the negotiations. He and Sinema will discuss the package with President Joe Biden on Wednesday. Read more
HOW MUCH WILL THE RICH BUSINESSES PAY?
On Wednesday, the House Ways and Means Committee was set to present a tax plan that would raise the highest tax rates to 39.6% for individuals and 26.5% for corporations and increase taxes. capital gains taxes, reversing part of Republicans’ tax cuts in 2017.
The Biparty Joint Committee on Taxation (JCT) estimates that the tax changes would generate $ 2.07 trillion in direct revenue over 10 years, potentially leaving a funding gap of more than $ 1 trillion unless the project’s investments were made. law are reduced.
The House plan could discourage some progressives calling for more tax fairness, as it opposed Biden’s proposals to raise the corporate tax rate from one-third to 28% and tax more on the wealth transfer via inheritance from wealthy families. It also keeps alive a tax break favored by private equity managers.
The moderate Democrats in the Senate will also have a say in the tax proposals. Manchin called for an even lower 25% corporate rate.
CLIMATE OBJECTIVES AT RISK?
As Democrats consider slashing the bill, Biden’s historic investments to fight climate change could be at risk, including tax breaks for electric vehicles, solar and wind power, and other measures aimed at reaching the Biden’s goal of net zero carbon emissions by 2050.
These are estimated at $ 235 billion over 10 years – including $ 7.4 billion in credits for electric bikes and $ 27 billion for electric vehicles – making them juicy targets to reduce the bundle. During the committee debate, Republicans hammered home these credits as freebies to wealthy Tesla car buyers (TSLA.O) and companies like Amazon.com (AMZN.O).
Eliminating some green energy provisions could erode support from progressives who had pledged transformative investments to tackle climate change.
CUT SOCIAL PROGRAMS?
Progressive votes could also be threatened if the social spending proposals at the heart of Biden’s plans to strengthen the middle class and reshape the economy are removed, including universal preschool leave and paid family leave.
Democrats’ plans to extend a larger child tax credit until 2025, offering families monthly payments of up to $ 300 per child, would cost $ 556 billion, according to JCT. Tax credits for workers and child care expenses would cost $ 35 billion and an expanded earned income tax credit for low-income workers would cost $ 135 billion over a decade.
But these could also be reduced if Manchin and other moderate Democrats succeed.
Manchin expressed concern that the child tax credit does not contain any work requirement for parents or any requirement for education. Reuters analysis found that expanding credit disproportionately benefited Republican states. Read more
STATE, LOCAL IMPTS
Republicans under former President Donald Trump’s 2017 tax law capped state and local tax deductions (SALT), at $ 10,000, increasing many tax bills in top-taxed Democratic states such as than New York and California.
The restoration of the previously unlimited SALT deduction – which New York Rep. Tom Suozzi estimates would cost some $ 385 billion – has been left out of the House tax plan. But Suozzi and other Democrats, including House Ways and Means President Richard Neal of Massachusetts, said they were “working daily” to pass the inclusion of significant SALT relief in the bill.
Suozzi opposes a bill without it, saying, “No SALT, no deal.”
Reporting by Jarrett Renshaw, David Lawder and Richard Cowan, editing by Nick Zieminski
Our Standards: Thomson Reuters Trust Principles.