Biden, Manchin outline parameters of new tax deal

 

President Joe Biden and Sen. Joe Manchin, D-W.V., outlined similar priorities for a potential resurrection of key pieces of the failed Build Back Better package, but there are still many problems blocking a deal.

Biden’s State of the Union Address dropped any specific references to Build Back Better, but pitched a smaller package of health care changes, climate change initiatives such as tax credits, and pre-K funding paid for by tax increases. Biden also pledged to use some of the new revenue to reduce the deficit.

The platform aligns closely with the priorities laid out by Manchin, who responded by outlining a potential package that reforms the tax code and lowers the cost of prescription drugs if the money raised is split between spending on new climate change proposals and deficit reduction and fighting inflation, with leftover money for fully funded social programs. Manchin has supported pre-K funding. Manchin also dropped some of his process complaints, acknowledging that bipartisanship will not be possible on such legislation and they would have to use the reconciliation process.

There are still many hurdles that make any agreement difficult. Progressives may be hard pressed to accept any deal without the child tax credit, which remains a major sticking point for Manchin. It also may be difficult for progressives to dedicate revenue to deficit reduction instead of cherished spending priorities. Deficit reduction is a key part of Biden’s renewed pitch to Manchin, and is seen key to fighting inflation. Inflation is likely to remain an issue throughout reconciliation negotiations, as data released last week showed the Consumer Price Index (a key measure of inflation) increased 7.9% year-over-year through February 2022—its fastest rise in 40 years. Finally, Manchin and Sen. Kyrsten Sinema, D-Ariz., are at odds over the tax title. Sinema and Biden would like to retain the 15% minimum book tax and adjusted gross income surtax, while Manchin would like to bring back a corporate rate increase and a capital gains rate increase. With time running out until election season, a deal will be difficult.

Nevertheless, Senate Majority Leader Chuck Schumer, D-N.Y., intends to move forward with certain portions of Biden’s platform, as he recently stated. The Senate will soon begin hearings on prescription drug pricing, and Schumer noted that additional hearings on other proposals will be held in the coming weeks.

Updates on a slimmed-down reconciliation bill are expected throughout the next several months, as many Democrats—and the White House—will hope to enact a bill prior to the August recess.

 

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