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Parties spar over two-track plan for tax hikes

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Tax Hot Topics newsletter The tentative agreement on a $579 billion bipartisan infrastructure package is prompting a showdown between Democrats and Republicans over a parallel reconciliation package expected to carry the Democratic tax increase agenda.

President Joe Biden and a bipartisan group of senators recently reached a general agreement on the infrastructure package, though the funding and many other details must still be resolved. Lawmakers agreed not to include any tax increases apart from $50 billion in unspecified tax gap measures. House Speaker Nancy Pelosi, D-Calif., has said the House may seek to make some changes to the Senate compromise, but the bigger source of contention is how closely lawmakers pair the bipartisan compromise with a second Democratic tax-increase package.

Progressive Democrats have warned that they will not support the bipartisan bill without assurance from moderates that they will enact a Democratic-only reconciliation bill that includes other Democratic priorities and tax increases. Biden sought to assuage Democratic concerns by pledging not to sign the bipartisan bill unless he could simultaneously sign the second Democratic-only bill. Republicans supporting the bipartisan bill revolted and demanded the two bills be de-linked. Republicans are hoping that the near unanimous Democratic support necessary for a Democratic reconciliation bill would evaporate after a bipartisan bill passes. Yet progressive Democrats seem unlikely to allow the bipartisan bill to advance without confidence the second bill will also succeed.

The timing and linkage of the two bills remains in flux, and the disagreement could threaten the bipartisan bill altogether. If the bipartisan agreement collapses, Democrats would likely seek to move a single large Democratic-only reconciliation bill instead.

Contact:
Dustin Stamper
Managing Director
Washington National Tax Office
T +1 202 861 4144

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