Senate Majority Leader Chuck Schumer, D-N.Y., and reconciliation bill holdout Sen. Joe Manchin, D-W.V., have re-engaged in negotiations over a new potential reconciliation bill that could include as much as $1 trillion in tax increases.
Discussions centered around potentially resurrecting key pieces of the failed Build Back Better (BBB) agenda in a smaller $1.3 trillion package that would include:
- $300 billion in drug pricing savings
- $1 trillion in unspecified tax increases
Half of that money would be dedicated to deficit reduction, with the other half going to key priorities, including:
- $300 billion or more in climate and energy provisions, including tax credits
- $200 billion in healthcare subsidies such as Affordable Care Act premium tax credit enhancements
- $200 billion for childcare initiatives
It is unclear how serious Manchin is about a potential deal, and whether the rest of the Democratic caucus would agree to what Manchin is demanding. Manchin called the negotiations with Schumer “respectful” and “encouraging, to a certain extent.”
“There could be nothing,” he said. “There could truly be nothing. That’s all I can tell you.”
Schumer and Manchin failed to reach a “hand-shake” agreement before an informal Memorial Day deadline, but negotiations have only heated up since then. Any reconciliation bill must be passed before the government fiscal year ends on Sept. 30, but realistically, a break-through would be needed much sooner. Manchin and Schumer are expected to continue negotiating before the Fourth of July recess.
There are conflicting reports on the potential contents of a $1 trillion tax title. Some sources indicate Manchin is still pushing for increases in the corporate and capital gains rates, while others say he has acquiesced to objections to those provisions from Sen. Kyrsten Sinema, D-Ariz. There are enough revenue raisers in the stalled version of BBB to raise $1 trillion without the corporate rate increase or the 15% minimum tax on book income. Potential provisions include:
- International reform (more than $300 billion)
- Expansion of the 3.8% net investment income tax ($250 billion)
- Surtax on adjusted gross income in excess of $10 million and $25 million ($227 billion)
- Expansion and extension of loss limit under Section 461(l)($160 billion)
- Increased funding for IRS enforcement ($127 billion net)
- Excise tax on stock buybacks ($124 billion)
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