Senate Minority Leader Mitch McConnell has privately assured his Republican colleagues that centrist Sen. Kyrsten Sinema, D-Ariz., is likely to block President Joe Biden’s proposed tax hikes on the wealthy and corporations, according to The Washington Post.
Biden has introduced a $2.3 trillion infrastructure plan that would be paid for with tax increases on corporations and a $1.8 trillion “American Families Plan” that would be funded with higher taxes on the wealthy and investors and increased IRS enforcement. Republicans are pushing a much smaller infrastructure counterproposal that would shift the tax burden from corporations to workers, and have loudly objected to the proposed tax increases. McConnell, however, does not seem worried about the hikes clearing the 50-50 Senate where a single Democrat can block any party-line vote.
McConnell has privately “reassured allies of Democrats’ long odds in approving tax hikes, pointing in particular to the voting record of Sen. Kyrsten Sinema,” according to the Post.
That suggests McConnell sees Sinema as a bigger impediment to Biden’s proposals than Sen. Joe Manchin, D-W.Va., who has called for raising taxes to pay for an infrastructure proposal as large as $4 trillion but wants a smaller increase on corporate taxes. Manchin has also rejected gas taxes and user fees proposed by Republicans as a tax on workers and commuters.
It’s not the first time McConnell has touted the record of Sinema, who has angered many Democrats by opposing Biden’s proposed minimum wage increase and calls from her party to eliminate the filibuster.
McConnell told Senate Republicans at a party meeting last month to “publicly praise” Sinema and Manchin for their opposition to Biden’s proposals, according to Politico. “It’s nice that there are Democrats left who respect the institution and don’t want to destroy the very essence of the Senate,” he told the outlet.
Economists have argued that Biden’s proposed corporate tax increases would ultimately help corporations by improving critical infrastructure. A group of five former IRS commissioners last week wrote an op-ed backing Biden’s proposal to boost IRS enforcement after the cash-strapped agency estimated it loses $1 trillion each year to unpaid taxes.
The IRS workforce has shrunk dramatically over the past decade due to repeated budget cuts and as a result “audit rates for millionaires have fallen more than 70 percent since 2011; audits of large corporations decreased from essentially 100 percent a decade ago to less than 50 percent,” the former commissioners wrote in a Washington Post editorial.
“President Biden’s proposal would restore our tax administration system to make it far fairer and more effective. This would benefit everyone who pays their taxes. It would produce a great deal of revenue by reducing the enormous gap between taxes legally owed and taxes actually paid,” they added.
In fact, Sinema and Manchin are not the only Democrats who may stand in the way of Biden’s tax proposals. Some Democrats worry that the IRS enforcement measure could result in “political backlash,” according to the Washington Post, and the Democratic Congressional Campaign Committee has privately warned that the tax plans could hurt vulnerable Democrats up for re-election next year. Although Democrats generally support a corporate tax increase, a “handful” of Democrats have balked at Biden’s proposed 28% rate even though that would not even fully reverse former President Trump’s 2017 tax bill, which cut the corporate tax rate from 35% to 21%.
Senate Finance Chairman Ron Wyden, D-Ore., Senate Banking Chairman Sherrod Brown, D-Ohio, and Sen. Mark Warner, D-Va., have released their own plan to tax multinational corporations, which is at odds with Biden’s proposal. Sen. Bob Menendez, D-N.J., has balked at Biden’s proposed tax increase on capital gains and investment income for those who earn more than $1 million per year. A group of about a dozen Democrats in farm states have expressed concerns about Biden’s proposed increase on assets passed down to heirs.
Meanwhile, a growing coalition of Democrats in high-tax states like New York, California and New Jersey have called for Biden to use the proposals to repeal the $10,000 cap on the State and Local Tax deduction, a move that research strongly suggests would primarily benefit the wealthy.
Biden has signaled that he is open to compromise and is scheduled to meet with lawmakers on both sides of the aisle this week, insisting he wants a bipartisan agreement — a prospect that seems out of reach. But the lack of a deadline on negotiations and numerous competing proposals show that Biden and his own party are also “worlds apart,” Republican economic adviser Doug Holtz-Eakin told the Post.
“Biden deserves some credit for trying to pay for permanent programs, but congressional Democrats do not want the politics of these tax hikes on their record in the midterms,” he said. “There’s a major disagreement here.”
Some Democrats have urged the administration not to fund the proposals completely and finance them instead through deficit spending, as with the $1.9 trillion coronavirus relief package passed in March.
“The whole point is that we are making generational investments that will provide value for 30 or 50 or 100 years,” Sen. Brian Schatz, D-Hawaii, told the Post. “With interest rates at a historic low, it makes sense to pay for these initiatives over a longer period of time.”
But Biden insisted last week that he is “not willing to not pay for what we’re talking about. I’m not willing to deficit-spend.”
Anita Dunn, a senior White House adviser, sent a memo to fellow Democrats last month seeking to tamp down concerns that the party may face political backlash next November if it supports tax increases, pointing to polls showing that the public supports tax hikes on corporations and the wealthy. Some polls even show that voters are more likely to support the infrastructure package if it is funded with higher corporate taxes than without a tax increase.
“We need to restore basic fairness to the tax code, and in the process generate revenues to invest in our competitiveness, children, and economy,” Dunn wrote. “And, the American people agree.”
“If critics want to turn this into a debate over taxing the wealthy and big corporations to pay for investments in the middle class, we’re happy to have that fight,” a White House official told Politico, which obtained the memo. “The American public is squarely on our side — it’s not even close.”
Now it’s largely a matter of Biden convincing his own party.
“This is a puzzle, and it’s a very personal puzzle to a lot of people who have parochial investment agendas trying to get their own things stuffed into these plans,” Frank Clemente, executive director of Americans for Tax Fairness, told the Post.