President Joe Biden’s $4 trillion plan to greatly expand the federal government relies on sharply higher taxes on the wealthy, but the man who would steer the proposal through Congress has his own ideas.
Even as many of his colleagues rally around the cause of sticking it to the rich, House Ways and Means Chair Richard Neal (D-Mass.) remains wary. He isn’t necessarily opposed to requiring the well-to-do to pay more, but he also isn’t convinced that Democrats’ need to fully pay for their plans with tax increases, especially when super-low interest rates mean the government can borrow cheaply.
He also has some thoughts about how to dole out the benefits of any package.
Much of the administration’s proposed spending falls under the jurisdiction of other congressional committees — which threatens to leave Neal’s panel with the unpopular work of raising taxes while others focus on the more enviable task of deciding how to distribute the goodies.
Neal has his own list of priorities that could end up squeezing out some of the administration’s proposals. Among them: making Democrats’ recent expansions of tax breaks for average Americans permanent; reviving the Obama-era Build America Bonds program; and creating a new payroll tax to subsidize the wages of daycare workers.
All of that underscores how Democrats have a lot of differences they need to work out, and that Biden’s proposal is merely the starting point in what’s likely to be months of negotiations.
A Neal spokesperson did not respond to requests for comment.
Neal’s committee will be crucial because all revenue legislation in Congress is supposed to begin with Ways and Means.
For now, his panel is in a holding pattern after Biden’s speech last Wednesday calling for a second big spending package, this one focused on the so-called care economy.
They’re waiting first for party leaders to decide how to proceed. It’s unclear whether Democrats will pursue a bipartisan plan with Republicans, in which case tax increases are probably off the table for now, or if Democrats intend to go it alone.
Tax writers also need the Treasury Department to release its “Greenbook,” a dense volume laying out the details of the administration’s tax proposals, including how much money they can be expected to raise.
Neal has been a notable exception to top Democrats campaigning for higher taxes on corporations and the rich.
While Senate Finance Chair Ron Wyden (D-Ore.) and his fellow tax writers have rolled out a plan to hike taxes on multinational corporations’ foreign earnings, going deep in the weeds of arcane issues like a tax called GILTI, Neal has been mum on the topic.
Likewise, he has studiously avoided embracing Biden’s roster of tax hikes. Last week, while he praised Biden’s “monumental” proposal to expand preschool programs, access to community college and other initiatives, Neal only obliquely referred to the administration’s proposed tax increases, in a fleeting reference to “fixing our broken tax code.”
Though many Democrats want to move quickly on a spending plan, Neal said he is in no rush to figure out the financing.
“I’m reluctant to embrace a direct revenue stream yet until we establish the architecture [of the plan],” he told CNBC last week. “What we’ve tried to do is to assess need, seek testimony and address the issue from the reality side and then address the issue of appetite for the revenue that will be necessary.”
That could in part be strategic because announcing ahead of time how lawmakers intend to raise taxes only gives lobbyists more time to rally opposition. As part of their March stimulus plan, when they needed money to stay within their budget limits, Democrats slipped in $60 billion in tax increases late in negotiations in part to stymie lobbyists.
While Biden would have Neal’s panel come up with the tax increases, much of his trillions in new spending for everything from highways to assistance to teachers would be parceled out by other committees, which has irked the tax panel.
Ahead of Biden’s speech, Neal rolled out his own detailed plan that diverges from the administration’s proposal on a number of issues.
He would make Democrats’ temporary expansion of the Child Tax Credit permanent, going so far as to work out the details of what would happen if a separate underlying expansion of the program by Republicans that expires in 2025 is allowed by lawmakers to lapse. Biden didn’t go nearly that far, in part because of the cost.
Neal also wants to create a new payroll tax break aimed at boosting incomes for daycare and other child-care providers by allowing employers to claim a $5,000 break, provided they pay workers more than the federal government’s GS-3 pay scale — currently about $11.50 per hour.
He wants to expand an Earned Income Tax Credit provision that will allow people to benefit from the break — which is typically pegged to how much they work — even when they lose their jobs.
He’s ticked off a list of other priorities important to him: reviving federally-subsidized Build America Bonds to finance capital projects; expanding New Markets Tax Credits, which encourage investment in low-income areas; and boosting tax incentives to build affordable housing.
In a statement last week, Neal alluded to how his proposals could potentially box out other initiatives because of costs.
“The committee will explore how to move forward with permanent extension to the Child Tax Credit, Earned Income Tax Credit, and Child and Dependent Care Tax Credit, and I think we can do so while still responsibly investing in other top priorities,” he said.
“Some details may vary between our proposals; however President Biden and I are united by our shared purpose to improve the lives of American families.”