Big changes in White House ideas to pay for $2 trillion plan

Big changes in White House ideas to pay for $2 trillion plan
LISA MASCARO, DARLENE SUPERVILLE and ALAN FRAM, Associated Press
Tue, October 19, 2021, 10:14 PM

SCRANTON, Pa. (AP) — In an abrupt change, the White House on Wednesday floated new plans to pay for parts of President Joe Biden’s $2 trillion social services and climate change package, shelving a proposed big increase in corporate tax rates though also adding a new billionaires' tax on the investment gains of the very richest Americans.

The reversal came as Biden returned to his hometown of Scranton, Pennsylvania, to highlight the middle class values he says are at the heart of the package that Democrats are racing to finish. Biden faces resistance from key holdouts, including Sen. Kyrsten Sinema, D-Ariz., who has not been on board with her party's plan to undo Trump-era tax breaks to help pay for it.

“This has been declared dead on arrival from the moment I introduced it, but I think we’re going to surprise them, because I think people are beginning to figure out what’s at stake,” Biden said in a speech at Scranton’s Electric City Trolley Museum, his first visit home since becoming president.

Negotiations between the White House and Democratic leaders on Capitol Hill are underway on what's now a scaled-back package but would still be an unprecedented federal effort to expand social services for millions and confront the rising threat of climate change. It's coupled with a separate $1 trillion bill to update roads and bridges.

Biden and his Democratic Party have given themselves a deadline to seal agreement after laboring to bridge his once-sweeping $3.5 trillion vision preferred by progressives with a more limited focus that can win over party centrists. He has no Democratic votes to spare for passage in the closely divided Congress, and leaders want agreement by week’s end.

The newly proposed tax provisions, though, are likely to sour progressives and even some moderate Democrats who have long campaigned on undoing the 2017 GOP tax cuts that many believe unduly reward the wealthy, costing the federal government untold sums in lost revenue at a time of gaping income inequality.

Administration officials spoke with congressional leaders on the tax alternatives, according to a person familiar with the private talks and granted anonymity to discuss them. The changes may be needed to win over Sinema, who had objected to plans to raise the rates on corporations and wealthy individuals earning more than $400,000 a year, said the person and several others.

As it stands, the corporate tax rate is 21%, and Democrats want to lift it to 26.5% for companies earning more than $5 million a year. The top individual income tax rate would rise from 37% to 39.6% for those earning more than $400,000, or $450,000 for married couples.

Under the changes being floated that 21% corporate rate would stay the same.

However, the revisions wouldn't be all positive for big companies and the wealthy. The White House is reviving the idea of a minimum corporate tax rate, similar to the 15% rate Biden had proposed earlier this year. That's even for companies that say they had no taxable income — a frequent target of Biden who complains that they pay “zero” in taxes.

And there could be a new billionaires’ tax, modeled on legislation from Sen. Ron Wyden, D-Ore., the chairman of the Finance Committee, who has proposed taxing stock gains of those with more than $1 billion in assets — fewer than 1,000 Americans.

Sinema has not publicly stated her position, and her office did not respond to a request for comment.

Another key Democrat, conservative Sen. Joe Manchin of West Virginia, has said he prefers a 25% corporate rate. He has been withholding his support for the bill with additional objections to its provisions on climate change and social services.

On the call with the administration and the White House, Wyden said he “stressed the importance of putting an end to America’s two tax codes, and finally showing working people in this country that the wealthiest Americans are going to pay taxes just like they do.”

The possible shift comes as Democrats appear to have made progress uniting themselves, ready to abandon what had been a loftier package in favor of a smaller, more workable proposal the party can unite around

In the mix: At least $500 billion to battle climate change, $350 billion for child care subsidies and free pre-kindergarten, a new federal program for at least four weeks of paid family leave, a one-year extension of the $300 monthly child tax credit put in place during the COVID-19 crisis, and funding for health care provided through the Affordable Care Act and Medicare.

Likely to be eliminated or shaved back: plans for tuition-free community college, a path to permanent legal status for certain immigrants in the U.S. and a clean energy plan that was the centerpiece of Biden’s strategy for fighting climate change.

“Nothing is decided until everything is decided,” said Rep. Pramila Jayapal, D-Wash., the leader of the Congressional Progressive Caucus after a morning meeting of House Democrats. “We’re just trying to get it done.”

Democrats are growing anxious they have little to show voters despite their campaign promises and have had trouble explaining what they're trying to do with the massive package, made up of so many different proposals.

It's a tall order that was leading to an all-out push Wednesday to answer the question — “What’s in the damn bill?” — as a press release from Sen. Bernie Sanders, the independent from Vermont, put it.

The president especially wants to advance his signature domestic package to bolster federal social services and address climate change by the time he departs for a global climate summit next week.

Rep. Ro Khanna, D-Calif., a progressive caucus member, said, "He really believes American leadership, American prestige is on the line.”

Manchin has made clear he opposes the president's initial energy plan, which was to have the government impose penalties on electric utilities that fail to meet clean energy benchmarks and provide financial rewards to those that do.

Instead, Biden is focused on providing at least $500 billion in tax credits, grants and loans for energy producers that reach emission-reduction goals.

On other fronts, to preserve Biden’s initial sweep, Democrats are moving to retain many of the programs but trim their duration to shave costs.

Biden wants to extend the $300 monthly child tax credit that was put in place during the COVID-19 crisis for another year, rather than allow it to expire in December, but not as long as Democrats wanted.

What had been envisioned as a months-long federal paid family leave program could be shrunk to as few as four weeks — an effort to at least start the program rather than eliminate it.

Biden also wants to ensure funding for health care programs, including for home- and community-based health care services, supporting a move away from widespread nursing home care.

And a new program to provide dental, vision and hearing aid benefits to people on Medicare proposed by Sanders, is likely to remain in some fashion.

Biden has told lawmakers that after his top priorities there would be $300 billion remaining.

That could lower the overall price tag or be used for other programs.

___

Associated Press writers Kevin Freking and Josh Boak contributed to this report.

What's in, and what's out, as Democrats trim Biden bill
KEVIN FREKING | AP
Wed, October 20, 2021, 3:45 PM

WASHINGTON (AP) — After months of talks, Democrats are edging closer to an agreement on what programs and policies to include in President Joe Biden's massive plan to expand health and safety net programs and combat global warming.

The plan seems likely to include an expansion of Medicare benefits for seniors, universal preschool, paid family leave and the continuation of a child tax credit that was increased earlier this year and applied to more families. Democrats are scaling back some investments or shortening the timeframe for when those programs would be up and running to fit within an approximately $2 trillion budget over 10 years, rather than the $3.5 trillion budget plan approved earlier by the House.

Still, Democrats are hoping the programs will prove so popular that future Congresses will continue to fund them in the years ahead. It seems unlikely that any Republican will support the measure.

Negotiations over the package are fluid. But here's where the bill stands so far, according to lawmakers and aides:

— A child tax credit increase would continue for another year. As part of a COVID relief bill, Democrats increased the tax credit to $3,000 per child age 6-17 and $3,600 per child age 5 and under. Limiting the program to one year would disappoint many of its backers, but they are hoping the program’s popularity will move Congress to extend it in the years ahead. Budget hawks worry that a one-year extension is a budgetary tool that will lower the cost of the program on paper, but mask its true costs since lawmakers tend to continue programs rather than let them expire.

— Medicare would be expanded to include dental, vision and hearing aids. It’s unclear when or how long each would be included as part of the benefit package Medicare covers. But each is expected to survive. Lawmakers are discussing the possibility of providing vouchers to seniors for dental care until the full benefit is enacted. Rep. Ro Khanna, D-Calif., put it this way after meeting with Biden: “What will emerge is a program on dental, vision and hearing that Senator (Bernie) Sanders is comfortable with.”

— Expanding Medicaid in about a dozen states and providing subsidies that reduce premiums for “Obamacare" plans are also still part of the plan. The Congressional Budget Office estimates the health insurance components in the bill would reduce the number of uninsured by about 3.9 million people over the next decade. Big boosts in Medicaid and Affordable Care Act plans would be partly offset by a 2.8 million decrease in employment-based coverage.

— The U.S. would join a long list of nations with a paid family leave program allowing workers to take time off for childbirth, to care for a new child or to deal with a serious health issue of a family member. But it’s looking like the 12 weeks of paid time off that Biden had proposed will be pared back to as few as four.

— Universal prekindergarten for all 3- and 4-year-olds and child-care subsidies for poorer and middle-income Americans are still in. Biden’s plan calls for parents earning up to 150% of the state’s median income (about $115,000 nationally) to pay no more than 7% of their income on child care, with the poorest families getting free child care. He has proposed a tax credit for as much as half of a family’s spending on child care, up to $4,000 for one child or $8,000 for two or more children.

— Free community college is probably out.

— It's also looking like a program considered a cornerstone of Biden's plan to fight climate change is out, largely due to opposition from Sen. Joe Manchin, D-W.Va. That program would have offered grants to power companies that increase clean energy generation by 4% each year and fines for those that do not. Still, hundreds of billions of dollars are expected to be included for programs designed to help the U.S. meet Biden's goal of a 50% reduction in greenhouse gas pollution in 2030 from 2005 levels.