Infrastructure in Search of Bipartisanship
This week saw two White House meetings where President Biden tried to deliver on his campaign promise of greater bipartisanship.
The first meeting on Wednesday was between the Republican and Democratic leaders of the House and Senate and the President. For Republican Leader Kevin McCarthy it was his first meeting with the President and he emerged with positive things to say and an apparent willingness to talk about a bipartisan infrastructure bill.
While Senate Republican Leader McConnell has taken a harsh, partisan tone towards the Biden Administration in fact the two have known each other for decades and seemed to have a good discussion during the White House talks. While the initial Republican infrastructure proposal came in with a price tag of $568B, McConnell in comments in Kentucky indicated that the Republicans may go as high as $800B which appears to be moving closer to an agreement.
Republicans have made clear that they have a “red line” against any changes in the Trump 2017 tax cuts. Biden and the Democrats have proposed increasing the corporate tax rate from the current rate of 21% up to 28%. Prior to the Trump cuts of 2017 the US corporate tax rate was one of the highest in the world at 35%, and the cut to 21% was one of the center pieces of the 2017 tax bill. Republicans credit the corporate tax cut for stimulating the robust economy President Trump presided over before the pandemic hit. As Leader McConnell has stated the Senate Republican conference from Collins to Cruz oppose increasing any of the taxes reduced under President Trump.
In remarks after the White House meeting with the Congressional leadership President Biden seemed to concede that there could be no changes in the Trump tax proposals if there is going to be a bipartisan approach. However, he made the point that giving more money to the IRS to go after tax cheats would not touch the Trump tax cuts; and more problematically he made the point that doing away the step up of basis for estates was not part of the Trump tax bill. While changing the treatment of estates is likely to be a non-starter with Republicans, money for the IRS is one way to raise as much as $1T for infrastructure.
Another area of raising revenue that Republicans can accept but raises issues for some Democrats, is user taxes such as an increase in the gas tax. The Federal gas tax stands at $.18.4 and hasn’t been raised since 1993; and with increased auto efficiency it brings in less revenue each year. Another potential user tax is a mileage fee aimed at electric vehicles that avoid the gas tax. Both of these revenue raisers may be on the table in a bipartisan infrastructure deal.
While the White House would like to agree to a bipartisan deal, they clearly have a “plan B” to pass infrastructure with only Democratic votes using Budget Reconciliation. In fact, no matter what emerges in a bipartisan deal it won’t include what Democrats label “social infrastructure” which will be included in Budget Reconciliation for the new fiscal year that begin October 1. The Budget Reconciliation infrastructure bill is likely to raise the corporate tax rate, maybe short of the 28% proposed by Biden, but above the current 21%.
Democrats are talking about the social infrastructure bill including proposals ranging from school construction to day care; but they will need to include the views of moderate Democrats such as Manchin and Sinema with Reconciliation requiring the agreement of all 50 Democratic Senators. At some point moderate Democrats are likely to get worried about deficit spending and the Reconciliation infrastructure bill is a possible place for this concern to emerge.
More from the author
Articles Read 1/2
🎁 Unlock 1 extra article by joining our Community!
Stay up to date with the latest articles. You’ll even get special recommendations weekly.
Already have an account? Sign In f58bf4-f6c9c8-c04938-923232-21ec96
Already have an account? Sign In f58bf4-f6c9c8-c04938-923232-21ec96
