Schumer announces Senate-House deal on tax ‘framework’ for $3.5T package
Senate Majority Leader Charles Schumer (D-N.Y.) on Thursday morning announced that the Senate, House and White House have reached a deal on a “framework” to pay for the massive human infrastructure spending package they hope to pass this fall under budget reconciliation.
“The White House, the House and the Senate have reached an agreement on a framework that will pay for any final negotiated agreement. So the revenue side of this, we have an agreement on,” Schumer announced at a joint press conference with Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Janet Yellen.
Schumer briefed reporters on the details of the agreement after the press conference.
“We had a meeting with Secretary Yellen and White House people,” he said. “And we reached an agreement on a framework, menu of options that will pay for any final negotiated agreement.”
Pelosi called it “an agreement on how we can consider, go forward in a way to pay for this.”
The deal does not include a top-line revenue number or a top-line spending number, said a senior Democratic aide familiar with the agreement.
The aide explained it’s an understanding between Senate Finance Committee Chairman Ron Wyden (D-Ore.) and House Ways and Means Committee Chairman Richard Neal (D-Mass.) about what revenue-raising proposals are on the table for the upcoming negotiations.
Wyden and Neal will use the House Ways and Means Committee’s tax proposal combined with a few “Senate ideas” that were left out of Neal’s bill, which his committee passed last week.
Neal, for example, did not include a proposal favored by Wyden to increase tax revenue from capital gains by eliminating stepped-up basis when calculating the tax obligations on inherited assets.
The House tax bill also left out a proposal championed by Wyden and Sen. Sherrod Brown (D-Ohio) to implement a 2 percent excise tax on stock buybacks as well as an idea endorsed by the White House to end the 1031 “like-kind exchange” tax break for real estate investors.
The proposed Senate language on ending the “carried interest” loophole, which allows investment fund managers to be taxed at capital gains rates instead of income tax rates, is stronger than in the House’s proposal.
Neal also left out a Biden-backed proposal to require financial institutions to provide more information to the IRS about bank accounts.
Wyden told reporters the menu of tax proposals can be dialed up or down to raise any amount of money needed to cover the full cost of the reconciliation package, which has yet to be agreed to — but is unlikely to go above the $3.5 trillion figure currently on the table.
“We are ready with options that are on what I call this menu to pay for the choices that Congress makes,” Wyden said.
The menu of revenue-raisers will be used as the template for negotiations with moderates such Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.) on the reconciliation package and how to pay for it.
Chuck Marr, senior director of federal tax policy at the Center on Budget and Policy Priorities, a progressive think tank, hailed the framework as a “big step forward.”
“They’re implying that they have agreement on a menu of revenue options that can be sized to fit any package, and obviously paying for it is always the hardest part, so that’s very good news,” he said.
“The House bill can be dialed up,” he added, noting that Neal’s proposed 3 percent surtax on people who earn more than $5 million can be adjusted to raise more money.
But Neal on Thursday afternoon told reporters he’s not interested in reviving the idea to tax unrealized capital gains that are passed on to heirs, who under current law can calculate their own future tax obligations based on the value of an asset when they receive it.
“Not at the moment, no,” he said when asked whether eliminating stepped-up basis is on the menu.
Neal, however, said there’s a tentative agreement between the two panels on requiring banking institutions to provide more information to the IRS.
The announcement appeared to catch some senators by surprise, as key players said Thursday morning they didn’t know what was in the framework.
Sen. Mark Warner (D-Va.), a senior member of the Finance Committee, said he didn’t have “the foggiest idea” of what it included.
Senate Budget Committee Chairman Bernie Sanders (I-Vt.) also said he wasn’t familiar with the details.
Naomi Jagoda contributed reporting