Democrats may torpedo their big plan: Shielding billionaire wealth, making it tougher to get aid

Corporate lobbyists fight back — and it looks like Rep. Richie Neal and Sen. Joe Manchin are doing their bidding

By Igor Derysh

Managing Editor

Published September 16, 2021 6:00AM (EDT)

Bernie Sanders and Joe Manchin (Photo illustration by Salon/Getty Images)
Bernie Sanders and Joe Manchin (Photo illustration by Salon/Getty Images)

Congressional Democrats are negotiating against themselves as they try to complete a spending plan that started at $3.5 trillion but is likely to shrink significantly in the weeks ahead. Though the party can pass the legislation without any Republican support, using the budget reconciliation process, pressure from Democratic moderates like Sen. Joe Manchin — amid a full-court lobbying blitz from pro-business groups — has already forced the sacrifice of several key aspects. Some progressive Democrats fear this is another example of the party abandoning key constituencies and core principles, and s say this could backfire badly at the ballot box.

Much of the focus in the negotiation has been on Manchin, the West Virginia senator at the chamber's dead center, who has threatened to oppose the bill unless its spending is cut by more than half. But House moderates have made similar demands: A new draft proposal from the House Ways and Means Committee looks a whole lot different from President Joe Biden's Build Back Better proposal and those offered by Senate Democrats. Many of these threats and revisions have come against the backdrop of a lobbying blitz by business groups who would like to defang the bill or kill it entirely, even as Republicans have gone largely quiet on the proposal.

There has been virtually no Republican ad spending to attack Biden's sweeping plan, which includes climate change measures, free community college and child care, an expansion of Medicare and Medicaid, family care and many other provisions. Polls have consistently found that the proposals in the bill have strong popular support. The push to cut key provisions from the package has only emerged after an aggressive campaign by corporate groups to block some of the proposed tax increases.

"They're lobbying to try to escape their obligation to pay the taxes they owe, leaving working families to pay a larger share of the burden," Biden complained last week.

The lobbying push included key former Senate Democrats, including former Montana Sen. Max Baucus, who played a key role in crafting the Obamacare law and has since started a lobbying firm. Baucus has worked to preserve a tax loophole that allows the rich to pass down assets and investments to heirs tax-free, writing in an op-ed that closing the loophole would hurt family farmers and ranchers. In fact, Biden's proposal includes an exemption for assets up to $1 million for individuals and $2.5 million for couples. Former North Dakota Sen. Heidi Heitkamp made a similar argument during a media blitz to oppose closing the loophole, painting it as damaging to "middle-class families." That came after Heitkamp joined a dark money group that opposes the tax. Just months earlier, Heitkamp had assailed the very same loophole as "one of the biggest scams in the history of forever on income redistribution."

"This is what oligarchy and a corrupt political system are all about," said Sen. Bernie Sanders, I-Vt., who chairs the Senate Budget Committee, on  Twitter. "The rich and large corporations get richer, and their lobbyists do everything possible to protect their wealth and greed. Not this time."

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But in fact, the incessant lobbying appears to have been effective. The House Ways and Means Committee — chaired by Rep. Richard Neal of Massachusetts, viewed with suspicion by many progressives — has released a draft proposal that would raise nearly $2.1 trillion in new taxes over the next decade but excludes Biden's and Senate Democrats' proposal to close the loophole. It also excluded Senate Democrats' proposals to crack down on tax avoidance practices by wealthy moguls like Amazon's Jeff Bezos or Tesla's Elon Musk after intense pushback from moderate Democrats, according to The New York Times, choosing instead to "go after the merely rich more than the fabulously rich."

"It's important to address the fact that billionaire heirs may never pay tax on billions in stock gains," Senate Finance Chairman Ron Wyden, D-Ore., said in a statement to Salon. "The nurses, firefighters, and teachers who pay their taxes with every paycheck know the system is broken when billionaire heirs never pay tax on billions in stock gains."

The tax proposal would roll back the Trump era tax cut on top earners and increase the top capital gains tax rate from 20% to 25%, well below the 39.6% proposed by the White House, though it would apply a 3% surtax on those who earn over $5 million. The plan would also roll back the Trump era estate tax cuts. This plan, however, is very different from the one offered by Wyden's committee, which called for a one-time surtax on billionaire wealth and an annual wealth tax. Biden has not backed a wealth tax but called for higher taxes on unrealized income and inheritances.

"America's billionaires are popping Champagne tonight as the House Ways and Means Committee — led by Chair Richie Neal — fails the president, fails the country and fails history," Erica Payne, president of the Patriotic Millionaires, a wealthy group that backs tax increases, said in a statement.

The House bill also falls short of Biden's call to raise the corporate tax rate from 21% to 28% after Republicans slashed it from 35% under Trump. The House plan would lower the corporate tax to 18% for businesses that earn under $400,000 and raise the top rate for businesses that earn over $5 million to 26.5%, leaving it well below what it was before 2017. The bill would also raise taxes on companies' overseas profits from 10.5% to 16.6%, less than the 21% sought by Biden. The Committee for a Responsible Federal Budget estimated that the House proposal would raise about $360 billion in revenue compared to $1 trillion under the White House plan. Polls have consistently found that most voters favor a wealth tax on the super-rich.

House moderates could also cut into the total revenue meant to pay for the social expansion with their demand to cut taxes for wealthy homeowners. Rep. Josh Gottheimer, D-N.J., and other members from affluent districts have demanded that the plan include a repeal of the cap on the State and Local Tax Deduction. Estimates suggest that about 86% of benefits from a SALT cap repeal would flow to the top 5% of earners. It could reduce the revenue raised to pay for the rest of the plan by $380 billion through 2025.

The House plan still includes Biden's proposal to increase IRS funding to go after wealthy tax dodgers, but administration officials have warned that the plan drops a measure to implement new bank reporting requirements that would help the IRS find rich people who are avoiding their tax obligations.

"It is important to ensure that the reporting regime is sufficiently comprehensive, so that tax evaders are not able to structure financial accounts to avoid it," Treasury Secretary Janet Yellen wrote in a letter to Neal on Tuesday. "Any suggestion that instead this reporting regime will be used to target enforcement efforts on ordinary Americans is wholly misguided."

Other lawmakers worry that the committee's plan would not provide key aid fast enough. The House proposal includes Medicare expansion to add coverage for dental hearing, and vision care, but the dental expansion would not be rolled out until 2028.

Officials inside the Biden administration have said it could take years to build out a system to include dental coverage, according to the Washington Post, and Democrats on the committee worry that the measure is "expensive" and delaying the start date would allow Congress to fund Medicaid expansion for states that opted out of the Obamacare expansion earlier in the 10-year plan. But the Ways and Means plan was released without any sign-off from the Biden administration or Senate Democrats, according to the Post's Jeff Stein.

A source familiar with the committee's discussions told Salon that while the Centers for Medicare and Medicaid Services already has limited systems in place for vision and hearing, it will require time for the agency to develop a fee schedule to pay dentists, develop standards for enrolling dentists and enroll providers.

Tricia Neuman, executive director of the nonprofit Kaiser Family Foundation's Program on Medicare Policy, agreed that it might take time to stand up the system. But "some may be disappointed that the implementation is so far away because many people on Medicare have high out-of-pocket costs for dental care or go without because they can't afford it," she said in an interview. While hearing and vision benefits would be rolled out earlier, Neuman said the group's research has found that "out-of-pocket spending is substantially higher" for people who receive dental and hearing care than for vision services.

Seniors, who typically make up the country's largest voting bloc, often face big dental bills and nearly half of Medicare beneficiaries have no dental coverage, according to KFF. The plan could repeat "one of Obamacare's big mistakes," warned Slate's Jordan Weissmann, noting that the health care law mostly didn't kick in for four years, well after Democrats were wiped out in the 2010 midterms — mostly due to the backlash over the law that has since become so popular that an all-Republican government couldn't repeal it. A recent poll found that 82% of likely midterm voters support adding dental coverage to Medicare.

"Democrats should work to ensure key parts of their agenda are felt by voters ahead of the midterms, particularly those that benefit high-turnout older voters," pollster Sean McElwee, the executive director of Data for Progress, cautioned in an email to Salon.

Senate Democrats are pushing to provide the new benefit as soon as possible, potentially by sending vouchers or pre-paid debit cards worth between $600 and $1,000 to seniors to cover the new areas of coverage while the administration stands up the new system. But a source familiar with the House discussions expressed concerns that such a plan could result in fraud and identity theft without proper safeguards and that vouchers would lack standards for service providers.

Neuman said that the plan would certainly provide help faster but would also "substantially increase the cost of the potential benefit."

"With physician services, for example, there is a Medicare fee schedule," she said. "With a voucher or debit card, it's conceivable there would be no limit on what one price is for a given service. It would just be whatever the charge is, which is, in some ways, no different than what occurs today."

Sanders' office did not respond to questions about the proposal from Salon.

Perhaps the biggest obstacles lie ahead on the Senate side, where Manchin called for the plan to be slashed from $3.5 trillion to between $1 trillion and $1.5 trillion. Sen. Kyrsten Sinema, D-Ariz., Manchin's ideological ally, has also balked at the price tag. Some Democrats appear willing to go along with shrinking the plan. House Majority Whip Jim Clyburn, D-S.C., said last week that the $3.5 trillion figure is just a "ceiling," not a "floor." Progressives don't agree, saying athat the $3.5 trillion is already a significant downgrade from Sanders' $6 trillion proposal.

Manchin's qualms aren't limited to the top-line cost. The West Virginia senator has pushed back against Biden's proposed corporate tax rate and some of the measures to combat climate change included in the proposal, which a majority of voters nationwide strongly support — but may be less popular in his home state. Manchin has been among the biggest recipients of campaign contributions from the oil and gas industry and progressives like Rep. Alexandria Ocasio-Cortez, D-N.Y.., have accused him of being beholden to fossil fuel companies, which he denies.

Manchin has also called to make some of the aid in the proposal harder to get by imposing means testing and work requirements, a key aspect of ill-fated Democratic welfare proposals in the 1990s

Manchin says he opposes the proposed extension of the enhanced Child Tax Credit, which provides up to $300 per month per child, because it lacks work requirements or "education requirements." Manchin also called to reduce the income cut-off for the credit from $150,000 to $50,000, calling for a more "need-based" approach. He told Insider that parents should have to provide a W-2 to show that they're working to get the credit.

"Children of parents who are laid off or are struggling to find work should not be punished further by losing the lifeline of a monthly Child Tax Credit," Seth Hanlon, a senior fellow at the Center for American Progress, told Salon, arguing that it's "unlikely that parents who can readily find a decent job would want to live and raise children on $3,000 or $3,600."

The credit also reduces barriers to work by allowing parents to afford child care, transportation and other necessities, Hanlon said. "By enabling their parents to provide basic expenses -- food, stable housing, school expenses, after school -- children will grow up healthier, do better in school and be more likely to stay in school, less likely to fall into the criminal justice system, less likely to fall victim to addiction, and they will ultimately work and earn more in adulthood."

The enhanced CTC, which is already phased out for people who earn more than $75,000, lifted an estimated 3 million children out of poverty in its first month, a 25% reduction. More than 400 economists signed a letter to Congressional leaders on Tuesday arguing that the expanded CTC can "dramatically improve the lives of millions of children," citing numerous studies finding that a "universal child allowance would have a negligible effect on employment." A Reuters poll published on Tuesday found that 59% of Americans support the expanded CTC.

Sen. Michael Bennet, D-Colo., one of the architects of the expanded credit, "strongly opposes adding work requirements," a spokesperson said in a statement to Salon.

"He believes punishing the poorest children in America because their family's income is too low to qualify them for the CTC is self-defeating and incredibly compromising to them and to our nation's future," the statement said. "Study after study shows work requirements don't work. Depriving families of economic security, food and shelter won't help them find a job faster. In fact, countries with a child credit have a higher workforce participation rate than the United States."

Sen. Sherrod Brown, D-Ohio, another architect of the program, also pushed back on the work requirements.

"Senator Brown believes that raising kids is work, and the families receiving the CTC are working hard every day to provide for their children — sometimes at multiple jobs," s spokesperson for Brown said in a statement to Salon. "Sen. Brown's been holding roundtables across Ohio since CTC payments started in July and he's heard from many families that they're using their CTC to pay for child care so that they can go back to work. The bottom line: these tax cuts have lifted millions of kids out of poverty and this policy should continue."

Manchin's lust for work requirements is unpopular among House Democrats either, and not just among progressives. Rep. Suzan DelBene, D-Wash., who chairs the moderate New Democrat Coalition, agreed that adding work requirements or other stipulations would "hurt middle-class families."

"Before Democrats expanded the credit in the American Rescue Plan, one in three children were left out of receiving the full benefit because their families didn't make enough money," she said in a statement to Salon. "The Child Tax Credit is an important tax cut for middle-class families and in only two months is already having an incredible impact on American children. For every dollar we invest in the expanded Child Tax Credit, we save eight dollars and ensure a better future for our kids. New Dems are all-in on extending the American Rescue Plan's Child Tax Credit for as long as possible and every Democrat — especially moderates — should be as invested in helping regrow our middle class."

Various committees in both chambers of Congress are racing to complete the bill before the end of the month. House Speaker Nancy Pelosi vowed to advance the budget bill at the same time as the bipartisan Senate infrastructure bill in order to shore up support from progressives, who balked at the lack of climate spending and social investments in the Senate package. Pelosi has also cut a deal with House moderates to set a vote on the infrastructure bill by Sept. 27 in exchange for their votes to advance the budget resolution — but progressives say they won't vote for that bill except in tandem with the larger spending package.

"As our members have made clear for three months, the two are integrally tied together, and we will only vote for the infrastructure bill after passing the reconciliation bill," Rep. Pramila Jayapal, D-Wash., chair of the Congressional Progressive Caucus, said in a statement.

Progressives say they also won't vote for a bill that slashes key parts of Biden's agenda.

"Between an ongoing global pandemic, the worst economic recession since the Great Depression, and a climate crisis that grows more dire by the day, the overlapping crises we face demand a reconciliation package that meets the moment," said Rep. Mondaire Jones, D-N.Y., in a statement to Salon. The $3.5 trillion, Jones said, "is not an arbitrary number," but is what's "necessary to fund President Biden's Build Back Better agenda — policies like universal child care, climate action, Medicare expansion, and more that are widely popular with the American people.

"Anyone working to undermine this bill is working to undermine President Biden's agenda and our nation's economic recovery, plain and simple. If Sen. Manchin is serious about delivering for the people of West Virginia and our nation, it's time for him to stop obstructing President Biden's agenda and commit to supporting a bill that meets this moment.

By Igor Derysh

Igor Derysh is Salon's managing editor. His work has also appeared in the Los Angeles Times, Chicago Tribune, Boston Herald and Baltimore Sun.

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