Democrats push tax hikes on wealthy over infrastructure ‘user fees’
Hearings this week could also expose divisions within party
Top Democrats argue voters would prefer tax increases on a small group of wealthy individuals and corporations to pay for infrastructure spending over broad-based “user fees” that would take a bigger chunk out of lower-income voters’ wallets.
That’s despite Senate Republicans putting transportation fees on the table as well as new taxes on electric vehicle drivers who don’t currently pay into the Highway Trust Fund. But President Joe Biden pledged not to raise taxes on anyone making less than $400,000, and Democratic leaders are anxious to protect vulnerable members facing tough midterm challenges.
Rep. Ron Kind, D-Wis., said his constituents weren’t troubled by Biden’s proposals to raise taxes on the top 1 percent of households and corporations, which would be an easier sell than increasing gasoline or other user fees.
“If the feedback back home is any indication, it sure is,” said Kind, a member of Democrats’ Frontline program for top House GOP targets. He won reelection last year by the closest margin of his career in a district Donald Trump carried twice.
By contrast, raising the gas tax “means my low-income, blue-collar families back in Wisconsin pay through the nose,” said Kind, a senior member of the House Ways and Means Committee, which has to sign off on any new taxes. “That ain’t going to happen here.”
A Morning Consult poll conducted April 21-25 supports Kind’s assessment. The survey found that 51 percent support raising the corporate tax rate to 28 percent, versus 31 percent support for a gas tax increase and 29 percent for a vehicle-miles-traveled tax to finance infrastructure.
“The American people are pissed off, and they’re with us on the diagnosis that they take too much of the burden and those at the top don’t take enough,” John Anzalone, a Democratic strategist and Biden pollster, said at a virtual rally Monday hosted by Americans for Tax Fairness.
Not all Democrats are ready to take user fees off the table, given Republican interest and the need to create sustainable revenue sources for struggling infrastructure-related trust funds.
“I think there’s a willingness to consider how you fund it on an ongoing basis,” said Sen. Benjamin L. Cardin, D-Md., a member of the Environment and Public Works and Finance committees.
“I might support the president. That’s fine with me. But if we can get a bipartisan bill and that includes some user fees, that’s what we should consider,” Cardin said. “I have never found user fees … to be a hurdle we can’t overcome in getting an infrastructure bill done.”
Senate Environment and Public Works Chairman Thomas R. Carper, D-Del., who also serves on Finance, told reporters ahead of a meeting with Biden last week that “those who use roads, highways, bridges … should bear part of the cost.”
Biden has proposed raising taxes on corporations to pay for his $2 trillion-plus jobs plan, which would spend billions on physical infrastructure like roads, bridges, waterways and transit; buildings like schools, child care facilities and public housing; electric vehicles and other clean energy technology; and workforce development training.
Republicans, led by West Virginia Sen. Shelley Moore Capito, proposed $568 billion in spending solely on physical infrastructure, paid for with user fees and unspent coronavirus relief funds. Capito and GOP senators who met with Biden at the White House last week are working on a revised offer with more detailed offsets.
But Republicans have drawn a “red line” against increasing taxes that they cut in 2017. And most user fees would violate Biden’s pledge not to raise taxes on anyone making under $400,000.
“A user fee is a tax on working-class Americans, and we don’t support that,” House Democratic Caucus Chairman Hakeem Jeffries of New York said last week.
“I agree with those who say that working families in our country should not have to subsidize the infrastructure of America, while letting the wealthiest off,” Speaker Nancy Pelosi said.
Pelosi floated other ideas that wouldn’t violate either party’s values, like increasing IRS enforcement to collect unpaid taxes. “There could be enough other money, but I would not take anything off the table,” the California Democrat said.
‘We are not homogeneous’
Lawmakers plan to discuss the universe of potential infrastructure offsets at two hearings this week. Senate Finance will hold a hearing Tuesday, with House Ways and Means following on Wednesday.
The hearings are all but guaranteed to highlight the partisan divide over increasing taxes, but they also risk exposing divisions among Democrats.
Senate Finance Chairman Ron Wyden appears to be in the camp of making the wealthiest Americans pay for Biden’s spending plans.
“The only folks who are not on board with our agenda of progressive taxation are so many far-right Republicans in Congress and their donors,” the Oregon Democrat said at the Monday rally with Anzalone, Pelosi and others.
By contrast, Finance Democrats such as Cardin, Carper and Washington’s Maria Cantwell are of the view that the past application of user fees to finance highways, airports and more makes it difficult to take those options off the table.
“We are not homogeneous,” Cantwell said of her fellow Finance Democrats.
Federal gasoline and diesel tax rates haven’t budged since the big 1993 deficit reduction law that was followed by historic losses for Democrats in the 1994 midterms.
Rep. Earl Blumenauer, D-Ore., argues there’s a disconnect between public perception of those taxes outside the Beltway and the political pain they cause on Capitol Hill.
The gas tax has “increased in something like 36 states on a bipartisan basis. And the people who voted for it were reelected at a greater percentage than the people who voted against it,” said the Ways and Means member, who introduced gas tax increase bills in the last four Congresses. “But we’ve never had the context here where it made sense with an administration that would be supportive.”
With the Biden administration opposed to a gas tax increase and a shift toward more fuel-efficient and electric cars that don’t pay as much into the system, Blumenauer is no longer pushing the idea.
“We need to actually eliminate the gas tax and replace it with something that’s sustainable, but simply raising the gas tax is a distraction,” he said.
For Democrats like Kind who represent lower-income and rural constituents, user fee increases are a double whammy.
The Joint Committee on Taxation and other independent analysts say such flat taxes generally put a larger squeeze on the poor than the graduated income tax, which hits harder at the top. At the same time, rural voters generally spend more time on the road, burning more fuel.
“You look at the distribution, who pays,” Kind said. “And my people in rural Wisconsin have to travel longer distances in their less fuel efficient pickup trucks, and you’re going to be paying a heck of a lot more.”
Still, some Democrats think user fees can be easier to defend to voters than tax increases.
“You drive the road, you got to pay something. I think that’s very fair,” Oregon Rep. Kurt Schrader said. “Folks in my state, whether you’re a trucker, a housewife or a rancher understand all that.”
Schrader is an experienced party messenger, having run the political arm of the Blue Dog Coalition, a group of centrist, fiscally conscious Democrats. His 5th District voted Democratic by just a few points in the 2012 and 2016 presidential elections before Biden defeated Trump by nearly 10 points, according to calculations by Daily Kos Elections. Schrader, however, faced his closest race in a decade last fall, underperforming Biden with a nearly 7-point win.
Biden’s tax increases likely won’t go over well with voters, especially against Republican attack ads that will undoubtedly gloss over the targeted audience, Schrader said.
“All you got to do is say we raised taxes and every single American is going to think it’s on them,” he said. “Let’s be honest; that’s the way, unfortunately, it is — even when it’s not true.”