A bipartisan group of lawmakers in Congress will release the details of their latest infrastructure proposal any day now, but their plan for paying for it remains hazy as Democrats move to bypass GOP opposition with a much more ambitious spending package.
The quest for a bipartisan infrastructure deal has exposed, more than ever, that lawmakers on the right are unwilling to raise taxes on those who benefit most from the U.S.’s lopsided economy to pay for investments in public resources, while many left-leaning lawmakers remain determined to make the rich pay their fair share without raising extra revenue off everyone else.
Between the two camps stand conservative Democrats, such as Senators Joe Manchin of West Virginia and Kyrsten Sinema of Arizona, who say Congress should reach a bipartisan compromise on infrastructure despite the GOP’s staunch opposition to taxing the wealthy, leaving negotiators with dwindling options for financing the plan. Meanwhile, Democrats are working on their own $6 trillion proposal that would allow for tax hikes on corporations and the wealthy and therefore could only pass along party lines.
Republicans have said for months that they would never support President Joe Biden’s original proposal for modest tax hikes on corporations and the wealthy that would chip away at the signature tax cuts passed by Republicans under President Trump. Biden drew his own line in the sand, refusing to renege on his campaign promise not to raise taxes on households making less than $400,000 a year.
“The logic of having the rich pay for it is both that they have been the big gainers in the economy over the last four decades and also that they just got a big tax break in 2017,” said Dean Baker, a senior economist at the Center for Economic Policy and Research, in an email. “It’s hard to argue that they would be suffering some great injustice if Biden were to reverse some or all of the 2017 tax cut for the rich.”
Biden and centrist Democrats worked to reach a deal with the GOP anyway, even as critics on the left warned them that the polling is in their favor and Republicans only wish to obstruct Biden’s agenda. Biden originally called for $2.3 trillion in infrastructure and jobs spending, along with a $1.8 trillion investment in education and support for children and families, and was willing to lower the price tag in negotiations with Republicans until those talks fell flat.
“The logic of having the rich pay for it is both that they have been the big gainers in the economy over the last four decades and also that they just got a big tax break in 2017.”
Republicans kept taxes on corporations and the rich off the bipartisan negotiating table in Congress, where a group of 21 lawmakers from both parties has floated several proposals for financing their latest offer, which outlines $579 billion in new spending on physical infrastructure such as roads, bridges, airports, water systems and public transit. This week, the White House and liberal lawmakers came out against one of those proposals for raising revenue: an increase in the federal tax on gasoline that would be paid by consumers at the pump.
Since 1993, the federal government has taxed gas at 18.4 cents a gallon. Republicans and the centrist Democrats who insist on working with them floated the idea of adjusting that tax rate to inflation. This would be an increase in “regressive” taxes — in other words, taxes on which lower-income people spend a higher percentage of their earnings than higher-income individuals. Such taxes include sales taxes on consumer goods and the fixed federal tax that is included in the price of gas. In contrast, “progressive” taxes are based on income or wealth, so people with more money pay more in taxes.
“There is no reason to fund infrastructure with a tax on the working class when we could tax the ultra-wealthy, whose businesses will benefit the most from that same bill,” Rep. Ro Khanna (D-California) said on Twitter.
In previous rounds of infrastructure talks, Republicans floated the idea of raising money with “user fees” such as tolls for roads and bridges. The cost of tolls also falls unevenly on working and lower-income people, and so there is little appetite for user fees among most Democrats in Congress.
Press Secretary Jen Psaki said on Monday that the White House is “not going to accept” a gas tax increase. Senate Budget Committee Chairman Bernie Sanders said on Sunday that he would support a bipartisan deal for fixing basic infrastructure, such as roads and bridges, but only without “regressive taxation.” Sanders and Khanna also oppose an annual user fee on electric vehicles proposed by the bipartisan group to pay for charging stations and other infrastructure necessary for electrifying transportation, a major climate goal for Democrats.
“One of the concerns that I do have about the bipartisan bill is how they are going to pay for their proposals, and they’re not clear yet,” Sanders said on “Meet the Press.” “I don’t know that they even know yet.”
Republicans floated the idea of raising money with “user fees” such as tolls for roads and bridges [but the] cost of tolls falls unevenly on working and lower-income people.
Lawmakers in both parties know that increasing the gas tax as people struggle to recover economically from the COVID pandemic would be hugely unpopular with voters. The details of the latest bipartisan plan have yet to be released, but a brief fact sheet notes that the proposed gas tax is a “placeholder pending an alternative non-tax offset” from the White House, effectively kicking the question of how to pay for it back to Biden.
Sen. Ron Portman of Ohio, a Republican in the bipartisan infrastructure group, said on Sunday that the gas tax may be dropped from the final package, citing Biden’s opposition.
The bipartisan group lists several other options, including the repurposing of pandemic relief funding and unemployment benefits to pay for infrastructure, which could anger liberal Democrats who want greater social spending as the nation continues to recover.
The bipartisan group also calls for “public private partnerships” and “asset recycling,” two methods of financing infrastructure through privatization that Republicans entertained during the Trump administration before failing to produce a coherent proposal. Progressive economists and advocates say these measures, which put profit-hungry private companies in charge of public infrastructure and assets, are no replacement for robust public investments and would only burden communities struggling to recover from the pandemic.
“Communities across the country have been ripped off by public-private schemes that enrich corporations and Wall Street investors,” said Mary Grant, the director of the public water campaign at Food & Water Watch, in a statement. “The most sensible infrastructure solution is to provide robust public funding for publicly owned projects, which would discourage price-gouging by corporate interests, protect public control over these precious assets, and save everyone money.”
The success of the bipartisan deal depends largely on support from Biden, who would like a bipartisan trophy but is well aware the Democrats are preparing to use the budget reconciliation process to bypass the filibuster and pass their own priorities along party lines.
Sanders and other Democrats are reportedly preparing a roughly $6 trillion spending proposal that would update the tax code to allow for tax increases on the wealthy and corporations. That package would pay for infrastructure investments proposed by Biden but dropped during bipartisan negotiations, including investments in “human infrastructure,” such as community colleges, expanded child tax credits and paid leave for workers. The Democrats preparing the progressive proposal are also hoping to include other priorities, such as combating climate change and reforming Medicare to expand the program and lower drug prices.
Republicans would unite against such legislation, so it would require support from all 50 Senate Democrats to pass, including the centrists determined to iron out a deal with Republicans. That could ultimately result in a slimmer Democratic spending package, but progressives hope the final legislation will still greatly exceed the $579 billion bipartisan proposal.
Besides the scope and price tag, the most obvious difference between the two emerging plans is the willingness of Biden and most Democrats to raise money off those who have the most of it. Republicans see their 2017 tax cuts, which benefited the wealthy and corporations, as a crowning achievement of the Trump years. By refusing to even consider modest revisions to those cuts from the beginning, the GOP set the terms for bipartisan infrastructure talks that are finally coming to a head this week.
“As far as the economic impact, there was not a noticeable uptick in investment or the economy as a whole from the 2017 tax cut, so there is no reason to think there will be serious economic damage if it were reversed,” Baker said.