Mitch McConnell, the Senate Minority Leader, has told his Republican colleagues that Sen. Kyrsten Sinema, D-AZ, is likely to vote against President Joe Biden’s proposed tax increases on the rich and corporations.
Biden proposed a $2.3 trillion investment package financed by corporate tax hikes, as well as a $1.8 trillion “American Families Plan” funded by higher taxes on the rich and owners, as well as improved IRS compliance.
Republicans are proposing a smaller infrastructure counterproposal that will move the tax burden from employers to workers, and they have been vocal in their opposition to the planned tax hikes.
McConnell, on the other hand, is unconcerned with the hikes breaking the Senate’s 50-50 split, which allows a single Democrat to obstruct any party-line vote.
McConnell has secretly “reassured supporters of Democrats’ long odds of supporting tax hikes,” using Sinema’s voting record as an example.
That indicates McConnell sees Sinema as a larger roadblock to Biden’s plans than Sen. Joe Manchin, D-W.Va., who has advocated for tax hikes to pay for a $4 trillion investment plan but prefers a smaller corporate tax hike.
Manchin has also opposed Republican proposals for petrol prices and usage fees as a levy on jobs and drivers.
It’s not the first time McConnell has praised Sinema’s record, which has enraged many Democrats by criticizing President Joe Biden’s proposed minimum wage hike and calls from her own party to abolish the filibuster.
McConnell told Senate Republicans at a meeting last month to “publicly praise” Sinema and Manchin for their opposition to Biden’s initiatives. “It’s nice that there are Democrats left who respect the institution and don’t want to destroy the very essence of the Senate.”
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Economists say that Biden’s planned corporate tax hikes would benefit businesses in the long run by strengthening vital infrastructure.
After the cash-strapped IRS claimed it losses $1 trillion per year due to unpaid taxes, a coalition of five former IRS commissioners wrote an op-ed last week supporting Biden’s plan to increase IRS compliance.
Thanks to repeated budget cuts, the IRS workforce has shrunk significantly over the last decade, 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.
Indeed, Sinema and Manchin aren’t the only Democrats who may oppose Biden’s tax proposals.
According to the Washington Post, some Democrats are concerned that the IRS enforcement action would cause “political backlash,” and the Democratic Congressional Campaign Committee has secretly cautioned that the tax plans would harm weak Democrats running for re-election next year.
In the fact that most Democrats favor increasing the corporate tax rate, a “handful” of Democrats have objected to Biden’s planned 28%, which would only partially overturn former President Trump’s 2017 tax bill, which reduced the corporate tax rate from 35% to 20%.
Senators Ron Wyden, D-OR, Sherrod Brown, D-OH, and Mark Warner, D-VA, have unveiled their own bill to tax multinational corporations, which differs from Biden’s idea.
Senator Bob Menendez, D-NJ, has expressed his opposition to Biden’s controversial tax hike on capital gains and dividend profits for those with more than $1 million a year.
Biden’s potential raise in properties passing down to descendants has alarmed a coalition of around a dozen Democrats in farm states.
Meanwhile, an increasing number of Democrats in high-tax states such as New York, California, and New Jersey have urged Biden to use the bills to abolish the $10,000 limit on the State and Local Tax Deduction, a measure that polling indicates will mostly favor the rich.
Biden has shown that he is willing to negotiate and is meeting with senators from both parties this week, insisting on a negotiated deal — a possibility that seems improbable.
However, Republican economic advisor Doug Holtz-Eakin told the Washington Post that the absence of a timetable for talks and the various conflicting plans prove that Biden and his own party are “worlds apart.”
“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 cautioned the administration not to fully support the plans, preferring to fund them by deficit spending, as was the case for the $1.9 trillion coronavirus relief bill approved 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-HI, told the Post. “With interest rates at a historic low, it makes sense to pay for these initiatives over a longer period of time.”
Last week, though, Biden maintained that he is not “willing to pay for what we’re talking about. I’m not willing to deficit-spend.”
Last month, Anita Dunn, a senior White House strategist, sent a memo to fellow Democrats attempting to allay fears that the party would face political opposition if it supported tax increases in November, citing polling indicating that the public favors tax hikes on businesses and the rich.
According to some surveys, people are more likely to accept the infrastructure plan if it is paid for by higher corporate taxes than if it is not.
“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 more up to Biden to persuade his own team.
“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.
“Biden is full-throated with his endorsement of making the rich and corporations pay their fair share. Democrats need to come in behind him.”
