‘Pride in product’ colors lawmakers’ view of budget negotiations

Turf battle between House and Senate ratchets up ahead of self-imposed deadline 

Rep. John B. Larson, D-Conn., left, huddles with Chairman Richard E. Neal, D-Mass., at a Ways and Means hearing in 2020. Larson says “pride in the product” is “a subset of the larger issue” of governance." (Caroline Brehman/CQ Roll Call file photo)
Rep. John B. Larson, D-Conn., left, huddles with Chairman Richard E. Neal, D-Mass., at a Ways and Means hearing in 2020. Larson says “pride in the product” is “a subset of the larger issue” of governance." (Caroline Brehman/CQ Roll Call file photo)
Posted October 27, 2021 at 1:59pm

House and Senate Democrats are engaged in a policy and process war over unresolved tax and health care provisions of the budget reconciliation package on which Democrats are trying to reach a “framework” agreement this week. 

Most of the major open issues fall under the jurisdiction of the House Ways and Means and Senate Finance committees. Final decisions have yet to be made on tax increases, prescription drug price negotiation, expansions of Medicare and Medicaid and a paid leave program. Aides have said paid leave is out, but lawmakers are still pushing for a solution. 

The Ways and Means Committee marked up legislation in mid-September that addressed those issues and other policies that comprise the bulk of the House’s $3.5 trillion-plus reconciliation package. The Senate Finance panel has yet to put together its own reconciliation offering, with the exception of an energy tax bill it marked up in late May. 

Ways and Means Democrats have argued for weeks that negotiators should choose from their proposals, especially on the revenue side, as they cut the original House package to $2 trillion or less. 

But Senate Finance Democrats, who’ve released some draft bills and principles to be considered, are still looking to make their mark. They’ve revived revenue ideas that were largely discounted until last week, when opposition from Sen. Kyrsten Sinema, D-Ariz., to raising tax rates hardened.

Newly expressed opposition from Sen. Joe Manchin III, D-W.Va., to requiring banks to report annual account inflows and outflows, which would help the IRS collect more revenue through tax enforcement, added to the urgency for alternative offsets.

Senate Finance Chair Ron Wyden, D-Ore., introduced two new draft bills this week. A 21-page measure would institute a 15 percent minimum tax on corporate “book” income for companies that report $1 billion in profits to investors. And a 107-page bill would annually tax unrealized gains like stock holdings of individuals with more than $100 million in annual income or $1 billion in assets for three consecutive years.

The ideas aren’t new — Wyden first proposed a tax on unrealized gains in 2019, and President Joe Biden floated a version of the corporate minimum tax in his budget — but the legislative language is. Ways and Means members argue it’s too late to consider complex changes to the tax code.

“We’re all of a sudden not talking about a plan that’s been vetted and passed,” said Ways and Means Chairman Richard E. Neal, D-Mass. “We’re talking about the objections of a couple of people.”

Ways and Means member John B. Larson, D-Conn., said “pride in the product” is “a subset of the larger issue” of governance.

“The public has got to know where you stand, and so if you don’t vote in committee … the only vote you take is all going to be mish-mashed in together at the end,” he said.

Deadline tension

Bicameral disagreement between the House and Senate tax writing committees isn’t new. It has taken the panels more time to reach consensus on smaller and more narrowly focused bills than the sweeping reconciliation package they’ve rushed to pass in just a few months. 

The tension is understandable, given the amount of legacy-defining issues at stake, from Wyden’s energy tax plan to Neal’s paid leave program. But the turf battle has ratcheted up as negotiators close in on another self-imposed deadline. 

Democratic leaders want consensus on the contours of the package this week — and the House has scheduled a Rules Committee meeting for Thursday to prepare for quick floor action — so Biden can tout the climate portions at a United Nations conference in Glasgow, Scotland, that begins Sunday. That’s also when surface transportation programs are set to expire; a Senate-passed bipartisan bill providing for a five-year reauthorization is being held in the House until a reconciliation deal is reached. 

With the clock ticking, Neal entered the week refusing to give any ground to nascent Senate Finance proposals over the drafted, approved and scored Ways and Means package. 

“The only thing I’m going to concede on tax is that our plan looks better every day,” he said.  

While waiting for text of Wyden’s billionaires’ tax plan, House Democrats spent part of a Tuesday caucus meeting expressing frustration with the Senate’s “back-of-a-napkin habit of legislating,” Ways and Means member Dan Kildee of Michigan said. 

Fellow House tax writer Jimmy Gomez of California left the caucus meeting, saying, “The Senate needs to start saying ‘yes’ or ‘no’ on issues and stop f------ talking.”

“We followed regular order and developed a bill. We put it forward,” Gomez said. “They keep on dealing with stuff in concepts and ideas.”  

Kildee said the “high volatility” of taxing assets like stock that fluctuate in value makes the billionaires’ tax little more than “a public relations idea.” 

“It’s not a substantive policy suggestion,” he said. 

Wyden pushed back on the House lawmakers’ suggestion that their proposals are superior, saying the closest Ways and Means got to ensuring the wealthiest pay their fair share is a 3 percent surtax on income above $5 million. 

“That doesn’t address the billionaire question because the billionaires … don’t take a wage. They don’t have income,” he said. “You’ve got to have something along the lines of our approach as it deals with tradable assets.”

Prescription drugs

One area in which Wyden has been less forthcoming is his preferred approach to negotiating lower prescription drug prices. 

He’s authored bipartisan legislation that would curb cost growth by, among other things, requiring drugmakers to pay rebates to Medicare if prices rise faster than inflation. But he hasn’t detailed how Medicare could negotiate for lower prices, which could produce bigger savings, other than saying he would target older drugs that no longer face competition and new drugs that launch at unjustified prices.

The House first passed its prescription drug pricing plan to allow Medicare to negotiate prices for hundreds of drugs based on an international pricing model two years ago. 

Roughly the same plan was included in the reconciliation package the Ways and Means Committee marked up in September, but House members haven’t gone to the mat for that the way they have with their tax proposals. That’s because they don’t have enough votes to pass it in the House amid opposition from a handful of centrist Democrats.

Wyden has run into similar trouble trying to find a drug pricing compromise that a few Senate Democratic holdouts can support. One of those, Finance member Bob Menendez, D-N.J., said Tuesday he had still not seen text of a proposal from Wyden, but they’ve had “some significant conversations.” 

Wyden has also provided little explanation for how negotiators will resolve Manchin’s objections to paid leave and expanding Medicare and Medicaid. 

Democrats not on the committee have been negotiating with Manchin: New York Sen. Kirsten Gillibrand is developing a paid leave alternative, and Georgia Sens. Jon Ossoff and Raphael Warnock have floated Medicaid expansion options. 

‘Tremendous amount of work’

Senate Finance members defend their panel’s work.

“Just because there’s not paper being circulated — there’s a tremendous amount of work that’s going on and continues to go on,” said Sen. Debbie Stabenow, D-Mich. “And language is being put together and scores being gotten and everything.” 

Sen. Benjamin L. Cardin, D-Md., cited the Finance energy tax markup and bills Wyden has put out addressing complex tax rules for pass-through businesses and the international system for taxing corporations’ foreign profits.

“There’s paper. And his views on a lot of these issues were well known in the House,” Cardin said.  

Wyden envisioned doing more. When he announced plans for the energy tax markup in May, he said the committee would also “consider additional key pieces of our jobs and infrastructure agenda.”

More markups never happened, likely in part because Republicans can block any bill from advancing given the 50-50 split. 

That’s a lost opportunity for member education, said Senate Finance ranking member Michael D. Crapo, R-Idaho, because “the legal counsel sit at the table and they are questioned by the senators about what’s in the bill.”

Menendez said Wyden had “a pretty good tax structure” but he’s had to adjust as senators take “hard and fast” positions against certain provisions.

“He’s doing as best a job as you can do under a constantly moving set of goals,” Menendez said. 

Laura Weiss, Mary Ellen McIntire, Lauren Clason and Paul M. Krawzak contributed to this report.