Democrats shifting from tax-rate hikes

New ways sought to cover spending

President Joe Biden sounded a confident note about his plan Wednesday at the Electric City Trolley Museum in Scranton, Pa., in his first visit to his birthplace since taking office.
(AP/Susan Walsh)
President Joe Biden sounded a confident note about his plan Wednesday at the Electric City Trolley Museum in Scranton, Pa., in his first visit to his birthplace since taking office. (AP/Susan Walsh)

SCRANTON, Pa. -- The Biden administration and congressional Democrats are moving toward dropping their push to raise corporate and individual income tax rates to pay for their domestic policy bill, instead drafting a plan that includes new ways to tax the wealthy and multinational corporations, according to people familiar with the discussions.

The conversations have been driven in large part by the concerns of a centrist senator, Democrat Kyrsten Sinema of Arizona, who has been resisting any increase in either rate for more than a month.

The reversal came as Biden returned to his hometown of Scranton, Pa., to highlight the middle-class values that he said are at the heart of the package the Democrats are racing to finish.

"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 that would still 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 working to bridge his $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.

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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, the 21% corporate rate would stay the same.

However, 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 says 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.

Another key Democrat, conservative Sen. Joe Manchin of West Virginia, has said he prefers a 25% corporate rate.

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."

Meanwhile, the Democrats are working towards a smaller, more workable proposal the party can unite around.

But a day after Biden outlined his ideas for trimming back some components to lawmakers, it was clear that the effort remained a work in progress as several Democrats signaled they were still fighting for their priorities.

In scaling back the bill, lawmakers are heeding the political realities of the 50-50 Senate.

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But many of the programs have seen significant cuts that could limit their duration or the number of Americans they cover, while others still have not been worked out in full -- setting the stage for a frenetic next few days of further negotiations.

Biden's proposal appears to have eliminated a key program to incentivize clean energy at the behest of Manchin, who had opposed it. Its omission angered some liberal-leaning lawmakers, who exited the meeting with the president on Tuesday evening calling on the White House to take a more aggressive stance to combat climate change.

"So my message to the president is, you just can't give up," said Rep. Jared Huffman, D-Calif., who spoke with reporters after huddling with Biden on Tuesday. "You certainly can't give up on the goal of 50 percent emission reductions by the end of this decade because if you do, we've got a planetary crisis here."

The Medicare expansion similarly could see cuts that affect its ability to offer new benefits in the way that lawmakers including Sen. Bernie Sanders, I-Vt., once envisioned. A plan to provide universal prekindergarten remains intact, but Democrats could end up shelving a related effort to provide two years of community college to Americans. And a proposal to extend expanded child tax credits has been scaled back, as lawmakers now look to authorize it only for the next year rather than permanently.

FAMILY LEAVE

On Wednesday, more than a dozen Senate Democrats implored Biden and congressional leaders to keep a national paid family leave program in the social services and climate change package.

In a letter to Biden, Senate Majority Leader Charles Schumer and House Speaker Nancy Pelosi, 15 senators from the moderate and progressive wings of the party warned Democratic leaders that a program offering paid family leave for all workers must be included in the proposal.

The senators said the covid-19 pandemic, which particularly sidelined working women who lost school and child care options, highlighted the stark need for the program.

"The pandemic has exposed an acute emergency on top of an ongoing, chronic caregiving crisis for working people and employers alike," the senators said in the letter. "We cannot emerge from this crisis and remain one of the only countries in the world with no form of national paid leave."

New York Sen. Kirsten Gillibrand, who spearheaded the letter, said she thinks there is wide support for a paid leave program but wants to make sure it's not placed on the chopping block as Democrats on Capitol Hill work to get the legislation's spending down.

Gillibrand said she's open to negotiating the terms of the paid leave program, but if it's not included in the final package, she might have a hard time voting in favor of the legislation.

"It would be extremely hard because this is a bill, if we don't pass it now, it won't have a time like this again," Gillibrand said.

Gillibrand said the proposal needs to be gender neutral, offering all workers paid leave for things like the birth of a child or caring for a sick or dying family member. The coalition of senators is seeking a plan to offer 12 weeks of paid leave, or as many weeks as can be negotiated, in a permanent way so it doesn't have to be muscled through Congress again.

The most recent version of the proposal would have offered the biggest benefit to low- and middle-income earners, offering up $5,000 of paid leave for workers, giving workers who earn $60,000 or less annually a full wage for 12 weeks.

In a meeting at the White House on Tuesday with a small group of progressive House Democrats, Biden told lawmakers he wants to include money to create four weeks annually of paid family leave, down from his 12-week proposal.

Biden's discussion of the revised plan was described by two people familiar with the session who would only do so on the condition of anonymity. One person said there would be limits on the incomes of families that would qualify for the program.

Gillibrand said senators are willing to compromise on the numbers and build on the program in the future. She said she's also seeking to meet with Manchin.

With a potential, new road map in hand, House Democratic leaders convened privately Wednesday to discuss their next steps. In a sign of the long slog on the horizon, Rep. Pramila Jayapal, D-Wash., the leader of the left-leaning Congressional Progressive Caucus, exited the session stressing that "nothing is agreed to until everything is agreed to by everyone."

But she also sounded an upbeat note about the talks still to come, telling reporters: "The discussions are moving. We feel good, we feel positive it's moving in the right direction."

Asked if most Democrats are comfortable with a new, lower price tag put forward by Biden, House Majority Leader Steny Hoyer, D-Md., sounded a similar note -- saying he "wouldn't put it" that way even as he acknowledged "members are in a position where they want to get something done."

"They understand that you've got to get everybody in the tent, because we have very close margin," Hoyer continued. "I think they'll accommodate that."

Information for this article was contributed by Lisa Mascaro, Darlene Superville, Alan Fram, Kevin Freking, Alexandra Jaffe, Michelle L. Price and Farnoush Amiri of The Associated Press; by Tony Romm, Seung Min Kim and Marianna Sotomayor of The Washington Post; and by Jim Tankersley and Emily Cochrane of The New York Times.

Sen. Joe Manchin leaves the Capitol on Wednesday as the Biden administration and congressional Democrats try to negotiate a spending plan. Manchin is opposing key elements of the plan, angering some lawmakers.
(The New York Times/Stefani Reynolds)
Sen. Joe Manchin leaves the Capitol on Wednesday as the Biden administration and congressional Democrats try to negotiate a spending plan. Manchin is opposing key elements of the plan, angering some lawmakers. (The New York Times/Stefani Reynolds)

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