There’s no lack of plans from Democrats paid for by undoing at least part of the huge 2017 corporate tax rate cut. But the only Democrat with a tax bill currently moving through Congress is pointedly not talking about revisiting the lower 21 percent rate.
The 14 percentage point rate cut in the 2017 law, which is permanent, was projected to save corporations $1.35 trillion over its first 10 years.
So, every percentage point rolled back represents roughly $100 billion toward paying for expensive Democratic proposals, putting a target on the corporate rate like no other.
“Every Democrat has their hands on that money,” said Rep. Bill Pascrell Jr., D-New Jersey, a senior member of the House Ways and Means Committee.
One presidential candidate, Sen. Kamala Harris of California, would return the rate to 35 percent to pay for a refundable tax credit of up to $6,000 per family. Another candidate, Sen. Amy Klobuchar of Minnesota, would hike the rate to 25 percent to help pay for her $1 trillion infrastructure plan.
In-between is former Rep. Beto O’Rourke of Texas, who said at Wednesday night’s Democratic debate in Miami that he’d take the rate up to 28 percent to help “generate the revenues . . . you need to pay for the programs we’re talking about.”
At the other end of the spectrum is a proposal from House Majority Whip James E. Clyburn, D-South Carolina, for a 0.03 percentage point raise to pay for reversing a feature of the 2017 bill that taxes some of the fringe benefits that nonprofits pay their employees.
But those are all just plans or bills that aren’t going anywhere, at least while President Donald Trump sits in the Oval Office.
House Ways and Means Chairman Richard E. Neal, whose committee advanced legislation last week — a $174 billion suite of tax break renewals and expansions of refundable credits — is the only Democratic lawmaker with live, moving tax legislation. While only about $38 billion of that figure is offset, Neal, D-Mass., insists the corporate tax rate is not on the table, at least for now.
While less sweeping than proposals from the campaign trail, Neal’s bills address some key Democratic proposals aimed at helping those on the lowest rungs of the income ladder, including expansions of the Earned Income Tax Credit and making the Child Tax Credit fully refundable.
Neal agrees the two bills now eligible to come to the House floor should be described as “markers,” positions he has staked out “for negotiating purposes” to possibly be included in some upcoming must-pass legislation, such as a budget deal or raising the debt limit.
But when asked how he’ll pay for the legislation, Neal leaves that to those future negotiations.
“Wisely so,” said Rep. John B. Larson of Connecticut, a senior Democrat on Ways and Means. “In this environment with no help from the Senate, it’s a graveyard over there for our legislation.”
That’s why Neal must play this game of “three-dimensional chess” in the hope of his bills being included in bigger negotiations, Larson added.
Another senior Ways and Means Democrat, Rep. Linda T. Sánchez of California, concurred with Larson’s assessment.
“Any time you talk about the corporate tax rate, the Republican side goes nuts,” she said. “I don’t think it’s unreasonable to look at potentially raising it modestly as a pay-for. But for the time being, for strategic reasons, Mr. Neal is not willing to go there.”
But Neal has gone to Senate Finance Chairman Charles E. Grassley, R-Iowa, meeting with him twice so far this year to discuss tax legislation. Grassley has loudly complained about Neal’s slowness in moving a package of expired or expiring tax breaks, known as tax extenders. But many of those extenders were included in one of last week’s bills, and Grassley said he was “very happy that the House is starting a bill” since all revenue measures must start in that chamber.
“I talked to Grassley twice and he seemed to be open-minded to expanding the child credit and the Earned Income Tax Credit,” Neal said earlier this week.
Grassley confirmed Thursday that he was indeed open to talking about expanding eligibility for the EITC for childless recipients, a core provision of Neal’s bill. But he declined to say how he felt about Neal’s legislation nearly tripling the maximum benefit for low-income childless taxpayers who are currently limited to an annual credit of $529.
Grassley, who has pledged to bar a revisitation the 2017 tax law, is rankled by the one offset in Neal’s tax extender bill.
It’s a $37.6 billion revenue raiser coming from an early sunset of the 2017 law’s doubling of the exemption on estate taxes, or as Republicans call it, the “death tax.”
While Neal says the estate tax provision fully pays for the tax extenders, Grassley argues that historically existing tax breaks don’t have to be offset when they are extended. The Senate Finance Committee’s ranking member, Ron Wyden, D-Oregon, has voiced the same position.
Grassley agrees the “death tax” rollback is a particularly unpalatable way to pay for the extenders.
“I hope he wasn’t serious,” Grassley said.
Republicans have hitched their political stars to the 2017 tax law, and the corporate rate cut in particular. GOP lawmakers continually argue the law has sparked booming economic growth and the lowest unemployment rate since 1969.
House Ways and Means ranking Republican Kevin Brady of Texas has repeatedly connected an improved economy with the tax code overhaul and has warned that revisiting the tax code could send the economy back “to the bad old days.”
He shakes his head as the long list of Democratic proposals to raise the corporate rate is recited.
“Democrats can’t help themselves,” he said.
But Democrats will likely be careful to propose only small increases in the corporate rate and tie that to measures with at least some bipartisan support. Senate Minority Leader Charles E. Schumer, D-New York, says he’d raise the rate just a “smidge” to help pay for an infrastructure bill.
Neal also wants to fix the impending failures of scores of multiemployer pension plans, and possibly revisit the state and local income tax deduction, which was capped at $10,000 in the 2017 law.
The first bill Neal introduced this year was the pension plan fix, which would provide Treasury funds for loans to likely more than 100 struggling union pension funds covering more than 1 million workers. Some Republicans call this a bailout, though supporters say there are safeguards to ensure the government gets its money back and that a cost estimate of $34 billion for the plan pales in comparison to the hits the economy and the social safety net would suffer from so many retirees losing much of their pensions.
The bill advanced on a party-line vote in the House Education and Labor Committee earlier this month, and is expected to be heard soon in Ways and Means.
Meanwhile, the imposition of the “SALT” limitation, which hit taxpayers in high-tax states like New York and California particularly hard, had a pair of hearings this week in Ways and Means.
The Joint Committee on Taxation estimated in 2017 that capping the SALT tax deduction, along with other smaller changes to itemized deductions, would raise revenues by $669 billion over a decade. Rep. Tom Suozzi, D-New York, claimed during the Ways and Means hearings that hole could be filled by rolling back other parts of the law, such as raising the corporate rate to 25 percent.
“It’s my goal that any end-of-year deal that’s made will include fixing the SALT cap,” Suozzi said.