House panel advances key portion of Democrats’ $3.5T bill
The House Ways and Means Committee on Wednesday approved a major portion of Democrats’ $3.5 trillion social spending package, including provisions that would raise taxes on high-income individuals and corporations in order to offset the cost of new spending.
The committee advanced the legislation in a near party-line vote of 24-19. Rep. Stephanie Murphy (D-Fla.) joined Republicans in voting against the measure. It now heads to the House Budget Committee, which will combine the various pieces of the spending package approved by House panels.
The legislation approved by the Ways and Means Committee on Wednesday includes a wide range of Democrats’ priorities.
It would expand infrastructure financing tools, expand the low-income housing tax credit, and extend and expand renewable energy tax credits.
It also would extend through 2025 much of the child tax credit expansion that Democrats enacted earlier this year while permanently making the credit fully refundable so the lowest-income families can receive the full credit amount.
Additionally, the legislation has several health-related provisions, including to make permanent an expansion of ObamaCare subsidies and to allow the Health and Human Services secretary to negotiate prescription drug prices.
The Ways and Means Committee’s measure also includes provisions to pay for new spending and tax breaks elsewhere in the package. It would raise the corporate tax rate for income above $5 million from 21 percent to 26.5 percent, raise the top individual income tax rate from 37 percent to 39.6 percent, raise the top capital gains rate from 20 percent to 25 percent and impose a 3 percent surtax on individuals’ income above $5 million. It also would provide the IRS with an additional $80 billion to strengthen tax enforcement and modernize its technology.
Democrats see the social spending package as an opportunity to advance President Biden’s economic agenda and make long-sought investments in order to strengthen the social safety net and combat climate change.
Ways and Means Committee Chairman Richard Neal (D-Mass.) touted the legislative proposals shortly after their passage on Wednesday, saying the planned investments would make the nation “more prosperous, equitable and fair.”
“Now is not the time to skimp on these investments. These are standards that Democrats should be setting. The nation indeed, I believe, is on our side,” he said.
The top Republican on the committee, Rep. Kevin Brady (Texas), repeatedly criticized the proposals during the final day of markup on Wednesday, panning the measures as an “economic surrender” to competitors and expressing concerns about inflation.
“We believe that our government is wasting so much to kill so many American jobs,” Brady said. “We will drive prices even higher and hook a whole new generation of poor on government dependency.”
Republicans offered a series of amendments that highlighted portions of the bill that they disagreed with, but none of them were adopted.
Murphy, the sole Democrat who voted no, said in a statement that she supports many of the provisions in the legislation but added that “there are also spending and tax provisions that give me pause.”
“I cannot vote for the bill at this early stage,” she said. “As this process moves forward, I remain optimistic that the comprehensive reconciliation package will be appropriately targeted and fiscally responsible—paid for by tax provisions that promote fairness but do not hurt working families.”
The Joint Committee on Taxation (JCT) estimates that the section of the bill focused on tax increases, excluding the IRS funding provision, would raise about $2.1 trillion over 10 years. Democrats say that the costs of the spending in the bill will be fully covered when also taking into account revenue raised by increased IRS funding, savings from drug pricing changes and revenue generated by economic growth.
The JCT estimated in a separate analysis of both the tax cut and tax increase provisions that the biggest tax increases would be on households making at least $1 million. Households under $200,000 would see their taxes decrease in the near term, though some middle-income groups would see a slight increase in taxes after the child tax credit expansion is set to expire.
The Ways and Means Committee’s vote on the tax cut and tax increase provisions comes at the end of a four-day markup on portions of the spending package.
Other pieces of the forthcoming package the Democratic-led panel has greenlighted in recent days also includes expansions to Medicare to cover dental, hearing and vision benefits and up to 12 weeks of paid family and medical leave for workers. A number of other House committees have also approved various portions of the package in recent days.
The committee on Wednesday in a final vote of 24-19 voted to send the entirety of the panel’s legislation to the Budget Committee.
Democrats are hoping to pass the full $3.5 trillion package in the coming weeks using reconciliation, a procedural process that allows them to bypass the Senate filibuster.
The tax writing panel is one of 13 House committees that were given instructions last month on how to craft the multitrillion-dollar package. All committee chairs were expected to have their portions of the package completed by Wednesday.
Leadership hopes to take quick action on the package when the rest of the House returns from recess starting next week, with its sights set on passing the massive spending plan in the lower chamber before the end of the month. But lawmakers will also face competing priorities, including a government funding deadline and the need to raise the debt limit.
Lawmakers are expected to make changes to the package before it becomes law.
For example, the Ways and Means Committee’s legislation does not include any changes to the $10,000 cap on the state and local tax deduction, but lawmakers are expected to add a provision on this topic before a House floor vote. Repealing the cap is a top priority for many lawmakers from New York, New Jersey and California, but some progressives are concerned that doing so would largely benefit high-income taxpayers.
Neal said Wednesday that he is discussing proposals with the Biden administration to increase third-party reporting requirements to strengthen tax enforcement, after the administration’s proposal in this area was not included in the Ways and Means Committee’s bill.
Additionally, any final bill that becomes law will need to get the support of both House and Senate Democrats, and various Senate Democrats have some of their own ideas on taxes and spending.
Moderate Democrats in both the House and the Senate have expressed concerns about drug pricing provisions, and legislation on the topic was defeated in the House Energy and Commerce Committee on Wednesday after three Democrats voted against it. While the provisions could be included in the legislation considered on the House floor because they were approved by Ways and Means, it’s unclear whether they could pass the House.
Some Senate moderates have indicated that they want the amount of spending to be significantly less than $3.5 trillion, while progressives are adamant that the total amount of spending remain at $3.5 trillion.
Senate Finance Committee Chairman Ron Wyden (D-Ore.) said earlier this week that he wants to prevent wealthy heirs from avoiding tax on investment gains. Biden had proposed earlier this year to address this issue by taxing capital gains at death, but Democrats from rural areas raised concerns about the president’s proposal, and such a proposal was not included in the Ways and Means bill.