WASHINGTON ― Democrats had a simple message about their Build Back Better plan: It would tax the rich to pay for new social programs that benefit everyone else.
But Democrats have struggled to coalesce around a tax plan. They already jettisoned several major reforms, and now their simplest and most popular proposals are crashing into surprising resistance from Sen. Kyrsten Sinema (D-Ariz.). Not to mention there’s a faction of Democrats insisting on a tax cut for the rich.
“We’ve got some challenges,” Sen. Jon Tester (D-Mont.) said Thursday when asked about negotiations over how to pay for the bill.
Sinema has said little publicly but has told the White House she won’t vote for a bill that increases corporate or individual tax rates, according to a Democratic aide familiar with the negotiations.
Democrats have to get Sinema on board because they need all 50 of their senators to vote for the bill, so they are turning to new tax ideas to win her over.
Democrats had planned to increase the top individual and corporate tax rates, partially reversing changes Republicans made in their 2017 tax law. Just those two reversals would raise hundreds of billions of dollars and go a long way toward offsetting the costs of universal prekindergarten, paid family leave, child care subsidies and a host of other initiatives.
Senate Finance Committee chairman Ron Wyden (D-Ore.) has proposed several alternate tax ideas that Sinema hasn’t ruled out, such as a levy on corporate stock buybacks and an annual tax on tradable assets owned by billionaires.
Wyden insisted that the novel “billionaire income tax,” as he calls it, would be as popular as the much simpler higher tax rate increases that Sinema doesn’t like. Higher tax rates on corporations and wealthy individuals garner strong majority support in polling going back decades, as well as a September poll by HuffPost and Data for Progress. More complicated stuff about assets and stock buybacks is generally less popular, with higher percentages of people saying they have no opinion.
“I have meetings at home and I say, ‘Folks, you’ve all been reading that these billionaires pay little or no income taxes for years and years on end,’” Wyden told HuffPost on Thursday. “And before I can even get to the second sentence, people start shouting, ’We pay taxes with all our paychecks! Make sure that [billionaires], like everybody else, pays their fair share.’”
Wyden originally came up with the billionaire and stock buyback taxes after House Democrats refused to close a loophole that allows wealthy heirs to avoid capital gains taxes on assets they inherit from their parents.
Progressive Democrats like Sherrod Brown (D-Ohio) and Sen. Elizabeth Warren (D-Mass.) have embraced the new ideas and described them as essentially the same thing as the much simpler tax rate increases that might go by the wayside.
“That’s what it means to be a Democrat,” Warren said Thursday. “We believe that billionaires and giant corporations ought to step up and help run this country. They’ve gotten a free ride long enough.”
Another problem for Democrats is that a faction of members from states like New Jersey, New York and Oregon are pushing for a tax cut on wealthy households that were disadvantaged by a limit on deductions for state and local property taxes in the 2017 Republican tax law.
Repealing the $10,000 limit on the so-called SALT deduction benefits the richest 1% of taxpayers more than any other income group, according to a recent analysis by the conservative Tax Foundation. And that’s what some Democrats are demanding, even though it’s entirely contrary to the party’s tax message.
“I’m pushing for full repeal,” Rep. Tom Suozzi (D-N.Y.) told HuffPost. “No SALT, no deal.”
President Joe Biden had told lawmakers in meetings this week that SALT would not necessarily be part of the Build Back Better bill, prompting furious pushback. Rep. Josh Gottheimer (D-N.J.) subsequently insisted to HuffPost that “SALT is alive.”
Rep. Brendan Boyle (D-Pa.), a member of the tax-writing Ways and Means Committee, said a partial SALT repeal, such as allowing $20,000 worth of deductions instead of just $10,000, would be more likely than a full repeal ― and also make the policy less of a boon to the super rich.
“You really would offer relief to that middle-class homeowner in suburban Philadelphia who is not rich, not poor, is literally making exactly median income, but saw their taxes go up as a result of the 2017 Republican bill,” Boyle said.
It’s unclear when Democrats might be able to settle all of their intraparty disagreements over what to include in the bill and how to pay for it. Democratic leaders initially hoped to reach an agreement by the end of the week, but the Senate left town Thursday without a deal.
“This is not going to happen anytime soon, guys,” Manchin told reporters ahead of a meeting with White House officials on Capitol Hill.
He added: “But I believe we are making good progress. ... There are a lot of details. You got to see the text and fine print. ... You have to make sure that the text matches the intent of what people want to agree and what they do agree and what they don’t agree on.”
Asked what was holding up the negotiations, Senate Majority Leader Chuck Schumer (D-N.Y.) declined to go into details.
“We’re working very hard, we’re rolling up our sleeves,” Schumer said. “There are some outstanding issues.”