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Live News Updates: Democrats Divided Over Tax Proposals to Pay for Budget Bill

ImageSpeaker Nancy Pelosi of California told Democrats they were on “the verge of something major.”
Speaker Nancy Pelosi of California told Democrats they were on “the verge of something major.”Credit…Stefani Reynolds for The New York Times

Democrats scrambled on Tuesday to determine how to pay for their sprawling spending plan as lawmakers expressed growing doubts about the feasibility of a new tax on billionaires and a proposal to make banks turn over more information about their customers’ accounts to the Internal Revenue Service.

Lawmakers were trying to find ways to raise revenue for their stalled legislation so they can finalize a deal before President Biden heads to Europe later this week for the Group of 20 leaders summit in Rome and a climate change conference. Since moderate Democrats have expressed opposition to raising tax rates, the pressure has been on lawmakers to develop new ways to pay for a bill that could carry a $2 trillion price tag.

Democrats have been considering applying a more stringent version of capital gains taxes on the billionaire class and a new corporate minimum tax on the “book income” that companies report to their investors but not the Internal Revenue Service.

On Tuesday afternoon, Senators Ron Wyden of Oregon, Elizabeth Warren of Massachusetts and Angus King, an independent from Maine, unveiled legislation aimed at ensuring that companies that report profits to shareholders but have little or no tax liability still pay a minimum amount in federal income taxes. The proposal would require companies with more than $1 billion of book income — the earnings that firms report each quarter to shareholders — pay a tax rate of at least 15 percent on those profits.

The lawmakers said the tax would apply to about 200 companies, including Amazon, and that it would raise “hundreds of billions” of dollars in tax revenue over a decade.

“The most profitable corporations in the country are often the worst offenders when it comes to paying their fair share,” Mr. Wyden, the chairman of the Senate Finance Committee, said. “Year after year they report record profits to shareholders and pay little to no taxes.”

The proposal is similar to one that Mr. Biden unveiled earlier this year as a way to pay for his agenda. The president’s plan would have applied a 15 percent tax to companies with $2 billion or more in book income and the administration estimated that about 45 companies would owe the tax if the plan was enacted.

Lobbyists familiar with the discussion said that Senate Democrats were struggling with the complexity of the new billionaire tax and were considering introducing a version of a surtax for millionaires that House Democrats introduced this year, potentially imposing a 3 percent levy on those earning either $5 million or $10 million per year.

Another key revenue raiser appeared in trouble as well. On Tuesday, Senator Joe Manchin III, Democrat of West Virginia, seemed to dash the Biden administration’s plan to have banks provide more customer account information to the I.R.S. to help the agency catch tax cheats and recover funds that the government is owed. Mr. Manchin called the idea “screwed up.”

Speaking to the Economic Club of Washington, Mr. Manchin recounted a recent conversation he had with Mr. Biden in which he said that he believed that the I.R.S. should have sufficient resources but that the agency should not have more visibility into individual bank accounts.

The Biden administration initially wanted banks to give the I.R.S. new details on their customers and provide data for accounts with total annual deposits or withdrawals worth more than $600. Earlier this month, top Democrats and the administration backed a plan that would raise that information reporting threshold to $10,000 and exempt pay that people receive through payroll processing systems and the federal government.

Mr. Manchin said that the idea was a non-starter and that Mr. Biden agreed with him.

“This cannot happen,” Mr. Manchin said.

The Biden administration estimated that its I.R.S. enforcement and bank reporting plans would raise about $700 billion over decade. The original bank reporting provision on its own was projected to raise about $460 billion.

Natasha Sarin, the senior Treasury Department official who helped develop the Biden administration’s plan to shrink the “tax gap,” defended the policy on Tuesday. She noted at an event sponsored by the Committee for a Responsible Federal Budget that the latest version of the proposal would exempt about 80 percent of the population and said that the critics of the idea have been trying to scare people with misinformation.

“This fear-mongering that you’ve seen that this is I.R.S. agents at every doorstep is just totally out of whack with what the proposal actually is,” Ms. Sarin said.

The White House and congressional leaders hope for a deal on the expansive plan this week, before President Biden leaves on Thursday for a trip that includes a United Nations climate conference in Glasgow.Credit…Stefani Reynolds for The New York Times

If something about this week’s frantic negotiations over President Biden’s domestic agenda seems achingly familiar, there’s a good reason.

Democrats went through the same painful dance — a legislative deadline, a marathon round of private talks with centrist holdouts, ultimatums from progressives — just a month ago, emerging without a deal and punting until this month.

All the same elements are in place now as Mr. Biden and top Democrats toil to strike a compromise that will allow their sprawling social policy, climate and tax increase bill and a separate, $1 trillion bipartisan infrastructure bill to move forward.

First, there is a hard deadline for approving the infrastructure measure before federal highway programs lapse on Sunday, which could force the furlough of thousands of Department of Transportation workers and shut down public works projects.

Then there are the ongoing, round-the-clock talks to entice two Democratic senators, Joe Manchin III of West Virginia and Kyrsten Sinema of Arizona, into the party fold on the broader domestic policy bill.

And of course, there are progressives in the House growing increasingly uneasy as they see some of their priorities being slashed or left on the cutting room floor. Trying to flex their recently developed muscle, some progressives want a House vote on final legislative language on the social safety net bill before agreeing to hand over their votes for the infrastructure measure.

It has all conjured up an eerie sense of déjà vu among Democrats on Capitol Hill, where lawmakers and aides remember all too well the last week of September, when they then ultimately failed to get either an agreement on the safety net legislation or a floor vote on the infrastructure plan, setting up this repeat performance.

Given the political forces at play, it is possible that the outcome could be the same this time. But Democrats believe there are some distinctions that could make a difference this go-round. They say they are further along in the talks with the two reluctant Senate Democrats and have narrowed their differences, putting them closer to a final agreement.

And while progressives are unhappy with the scaled-down scope of the plan — which some of them initially wanted to total $6 trillion and is now in the neighborhood of $1.75 trillion — many of them have accepted the political reality that such a costly bill cannot squeak through a Congress where Democratic majorities are so slim.

Time pressures are also mounting. Democrats would dearly like to pass the infrastructure measure before the highway program expires on Halloween. It would not only avert a disruption, but could help the Democratic candidate, Terry McAuliffe, in the tight Virginia governor’s race next week.

Democrats also want to send Mr. Biden to climate talks in Scotland next week with new programs to curb emissions firmly in hand. And they would like to end the unsightly sausage-making that is going on so they can start selling the benefits of the measures to those who could gain from them, rather than keeping the focus on what is being jettisoned.

Speaker Nancy Pelosi was hard at work Tuesday morning trying to keep the pressure on.

“There’s not that much more time,’’ Ms. Pelosi said as she left a private party meeting. “We have to have decisions largely today, a little bit into tomorrow, so we can proceed.”

Of course, something about that sounds familiar as well.

Senator Joe Manchin III of West Virginia is not the only centrist Democrat who has raised concerns about parts of the bill, but he is a popular target for lawmakers trying to salvage key provisions.Credit…Stefani Reynolds for The New York Times

Senator Kirsten Gillibrand, Democrat of New York, reached out to him asking for help extending federal paid leave.

The No. 3 House Democrat, Representative James E. Clyburn of South Carolina, and both Georgia senators, Raphael Warnock and Jon Ossoff, have made personal pleas for him to drop his opposition to a Medicaid expansion that would help their constituents.

As Democrats push for a compromise on their marquee domestic priority, Senator Joe Manchin III of West Virginia, the most outspoken holdout on the plan and a crucial swing vote, has become the object of intense lobbying by his colleagues.

In an evenly divided Senate, the fate of President Biden’s domestic agenda could hinge on any Democratic senator willing to withhold their vote. And while Mr. Manchin is not the only centrist who has raised concerns, his lengthy bill of particulars has made him a popular target for lawmakers trying to salvage provisions in the rapidly shrinking plan.

In recent days, Mr. Manchin has publicly objected to major components of the bill, including expansions of Medicare and Medicaid, a federal paid leave program, two major climate provisions, and a proposal to empower the Internal Revenue Service to obtain data for customers’ bank accounts as part of an effort to crack down on unpaid taxes and raise revenue to pay for the package.

Mr. Manchin, whose demand that the overall package not exceed $1.5 trillion has driven a frenzied effort to cut down the cost, has maintained that he is keeping an open mind out of fairness to Mr. Biden and Democratic leaders.

His maneuvering has prompted rumors that he might soon leave the Democratic Party, but he describes it as part of his political identity, no matter his affiliation.

“Do you think by having a D or an I or an R is going to change who I am?” Mr. Manchin said on Tuesday during an event hosted by the Economic Club of Washington. “I don’t think the Rs would be any more happier with me than Ds are right now.”

“I don’t know where in the hell I belong,” he concluded, drawing laughter from the audience.

These days, he can usually be found huddled with other Democrats who are seeking his support — or to change his mind — on a component of the social policy bill. On Monday evening, it was Senator Chuck Schumer of New York, the majority leader, along with Senators Thomas R. Carper of Delaware, Maria Cantwell of Washington and Ron Wyden of Oregon, all seeking to preserve a fee on methane emissions to which Mr. Manchin had objected.

Democrats have good reason to court Mr. Manchin’s support. They well remember how difficult it was to win his vote on the $1.9 trillion pandemic aid plan enacted earlier this year, and his last-minute effort to slash the size of the unemployment benefits included in it. (While Mr. Manchin ultimately voted yes after winning concessions, the grueling negotiating session led to the longest open Senate vote in modern history.)

Seven months later, he and Senator Kyrsten Sinema, Democrat of Arizona and another holdout, are similarly situated to cause problems for the bill if they cannot be won over.

“I’m talking to Senator Manchin and all my colleagues,” Mr. Warnock said. “They know that Medicaid expansion is a top priority for me.”

Speaker Nancy Pelosi of California told Democrats they were on “the verge of something major.”Credit…Stefani Reynolds for The New York Times

Democrats met privately on Capitol Hill on Tuesday as they searched for an elusive compromise on a domestic policy and climate package, pressing to resolve disagreements over health benefits, paid leave, environmental provisions and how to pay for the plan.

As Democrats seek to pacify centrist holdouts balking at central pieces of the bill, party leaders are lobbying rank-and-file lawmakers, particularly liberals, to accept a measure that will be far smaller than a $3.5 trillion blueprint that passed Congress earlier this year. House Democrats discussed the negotiations at their weekly caucus meeting on Tuesday morning, while Senate Democrats were expected to continue meeting throughout the day on climate and tax provisions.

Speaker Nancy Pelosi of California told Democrats they were on “the verge of something major,” according to two people familiar with her comments, who disclosed the private remarks on the condition of anonymity. She called the legislation “transformative, historic and bigger than anything else.”

The caucus concluded shortly before 10:30 a.m. Ms. Pelosi and Representative Pramila Jayapal of Washington, the chairwoman of the Congressional Progressive Caucus, are set to meet this afternoon, according to an aide.

Leaving the caucus meeting, Ms. Pelosi said, “There’s not that much more time — we have to have decisions largely today, a little bit into tomorrow, so we can proceed.” Asked what was left on the negotiating table, she said, “I think it’s pretty self-evident.”

Separately, Senator Kyrsten Sinema of Arizona, a key holdout on the bill, met with senior White House officials on Tuesday to discuss the negotiations, according to an administration official.

Jen Psaki, the White House press secretary, acknowledged that the package would not contain everything President Biden had wanted, but argued that it was still well worth supporting.

“The alternative to what is being negotiated is not the original package, it is nothing,” she said, warning against letting “the perfect be the enemy of the historic.”

The White House and congressional leaders hope for a deal before Mr. Biden leaves on Thursday for a trip that includes a United Nations climate conference in Glasgow, where he is expected to call for stronger international action to counter climate change. His case could be bolstered by an agreement on a bill that includes strong new climate programs.

“It changes the lives of the American people,” Mr. Biden said of the proposed legislation during an appearance at a transit maintenance facility in Kearny, N.J., on Monday, where he promoted the plan’s payments to families with children and its child care assistance. “So let’s get this done — let’s move.”

But with Republicans uniformly opposed to the bill, Democrats cannot afford to lose a single vote from their party in the 50-50 Senate, giving any senator outsized power to sink the plan over even a single provision. That has further complicated the effort to muscle the bill through Congress using a special budget process known as reconciliation that shields it from a filibuster.

The emerging compromise could cost around $1.75 trillion over 10 years, though leading Democrats were trying to nudge Senator Joe Manchin III of West Virginia, a key centrist, closer to $2 trillion. Mr. Manchin and other moderates have resisted significant pieces of the plan, including environmental provisions, health care expansions and tax increases designed to pay for the spending.

Mr. Manchin, in particular, has balked at multiple climate provisions, in part as a defense of his coal-rich state. He effectively jettisoned a proposed $150 billion program that would replace coal- and gas-fired power plants with wind and solar power, and is now pushing to remove or modify a provision that would impose a fee on emissions of methane, which are commonly produced in coal mining.

He is also facing pressure from his colleagues over his resistance to two expansions of health care benefits and a new paid leave program. He has opposed a push led by Senator Bernie Sanders, the Vermont independent and chairman of the Budget Committee, to expand Medicare to include dental, vision and hearing benefits, citing the program’s financial instability.

Mr. Manchin has also questioned a push to cover a Medicaid expansion for the dozen states whose leaders have refused to expand the program under the Affordable Care Act. West Virginia is among the states that expanded Medicaid and pay 10 percent of the cost, and Mr. Manchin has said the proposal would in essence reward states for holding out.

The Senate Finance Committee is readying the details of a billionaires’ tax, an entirely new approach to taxing wealth, and other tax provisions that will help pay for the bill without increasing the corporate or individual tax rates. While House Democrats expressed concerns about the details of the plan, which is largely being crafted by their Senate counterparts, Ms. Sinema opposes those rate increases.

To ease supply chain bottlenecks that are driving up consumer prices, President Biden announced this month that the Port of Los Angeles would operate around the clock. Credit…Erin Schaff/The New York Times

At least once a week, a team of President Biden’s top advisers meet on Zoom to address the nation’s supply chain crisis. They discuss ways to relieve backlogs at America’s ports, ramp up semiconductor production for struggling automakers and increase the ranks of America’s truck drivers.

The conversations are aimed at one goal: taming price increases that are hurting the economic recovery, unsettling American consumers and denting Mr. Biden’s popularity.

For months, Mr. Biden insisted that rising prices were a temporary hangover from the pandemic recession and would quickly recede. Instead, he and his aides are now bracing for high inflation to persist into next year, with Americans continuing to see faster increases in prices for food, gasoline and other consumer goods than at any point this century.

That reality has complicated Mr. Biden’s push for sweeping legislation to help workers, expand access to education, and fight poverty and climate change. And it is dragging on the president’s approval ratings, which could threaten Democrats’ already tenuous hold on Congress in the 2022 midterm elections.

Recent polls show that Americans’ concerns about inflation are eroding their economic confidence and dimming their view of Mr. Biden. National surveys by CNBC and Fox News show a sharp decline in voter ratings of Mr. Biden’s overall performance and his handling of the economy, even though unemployment has fallen quickly on his watch and economic output has strengthened to its fastest rate since Ronald Reagan was president. Voter worry over price increases has jumped in the last month.

Administration officials have responded by framing Mr. Biden’s spending bill as an effort to reduce costs that American families face, citing provisions to cap child care expenses and expand subsidies for higher education, among other plans. And they have assigned staff to look at options for unclogging supply chains, bringing more people into the work force, and reducing food and gasoline costs by promoting more economic competition via executive actions.

The reconciliation process allows Congress to advance certain spending and tax bills on a simple majority vote.Credit…T.J. Kirkpatrick for The New York Times

The budget reconciliation process allows Congress to advance certain spending and tax bills on a simple majority vote, freeing lawmakers in the Senate from the 60-vote threshold most legislation must meet to be considered. Democrats are aiming to use the process to pass the sweeping social safety net and climate change measure, which carries much of President Biden’s agenda, in the face of united Republican opposition.

The process begins with a budget resolution, which establishes a blueprint for federal spending and directs congressional committees to write bills to achieve certain policy results, setting spending and revenues over a certain amount of time. Its name refers to the process of reconciling existing laws with those directives. Here are some key things to know about the legislative maneuver.

While reconciliation allows senators to scale procedural and scheduling hurdles, it is also subject to strict limits that could constrain the scope of any package Democrats seek to pass.

In the Senate, the “Byrd Rule,” established by former Senator Robert Byrd of West Virginia, bars extraneous provisions, including any measure that does not change revenues or spending, affects the Social Security program or increases the deficit after a certain period of time set in the budget resolution. It is intended to ensure that the reconciliation process cannot be abused to jam through any unrelated provision.

The rule’s name lends itself to a number of bird-related puns commonly used to describe the stages of the reconciliation process. There is the “Byrd bath,” when the Senate parliamentarian scrubs and analyzes a bill for any provision that violates the rule if a senator raises a concern about a violation. Anything that does not survive the scrutiny is known as a “Byrd dropping,” and is removed from the legislation before it can advance.

Vice President Kamala Harris could also overrule the parliamentarian, but that has not been done since 1975.

A budget blueprint on the social spending and climate bill was advanced in August and committees have been working on drafting the reconciliation legislation, but key centrist Democrats in the Senate who have balked at the $3.5 trillion price tag have brought the process to an impasse as party leaders try to negotiate a compromise.

Because Republicans have made it clear they are unified in their opposition, Democrats cannot afford to lose even one vote from their party in the Senate. In the House, the math is almost as challenging; if every member voted, Democrats could afford to lose only three of their members and still pass the legislation.

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