Democrats hesitant to raise taxes amid pandemic

President Biden declared during the campaign that he would repeal the Trump tax cuts on “day one,” but after more than a month in office, some key Democratic lawmakers say they are reluctant to raise taxes during an economic slowdown.

Democratic leaders are more focused on sending out $1,400 stimulus payments to qualifying adults and children by the middle of next month and following that up with a jobs and infrastructure package that could cost as much as $3 trillion.

There’s been little discussion, however, on finding ways to raise revenue for Biden’s $1.9 trillion American Rescue Plan or his Build Back Better proposal, which may cost even more. While some in the Democratic caucus, such as Senate Budget Committee Chairman Bernie Sanders (I-Vt.), want to raise taxes for corporations and wealthy individuals, getting the votes to do that would be extremely challenging. But if Democrats punt, they potentially would be trying to raise taxes in 2022, an election year when both chambers of Congress will be up for grabs.

Democratic leaders have a razor-thin 50-50 Senate majority and a five-seat House majority, leaving them little room to maneuver at a time when centrist Democrats are reluctant to raise taxes while unemployment is high and the economy is still shaky.

Sen. Joe Manchin (D-W.Va.), a key swing vote, told The Hill in early January that it would be “ridiculous” to repeal the Trump tax cuts while the COVID-19 pandemic is still a burden on the economy and Congress has a lot of other legislative priorities on its plate, such as addressing the need for more vaccines.

Manchin on Tuesday eased back a bit by saying, “everything’s open for discussion.”

In a webinar on Wednesday, Manchin also expressed concern with the nation’s debt level and touted the importance of infrastructure.

He told American Council for Capital Formation President and CEO Mark Bloomfield that the U.S. “is closing quickly on $28 trillion in national debt. … We are going to have to pay for whatever we do.”

“Sooner or later, we’ve got to pay,” Manchin added, “Nobody likes taxes, I know that. Well, if you like your water and your sewer and your road and everything you receive and the food and all the amenities you have in life, maybe you better figure out how we’re going to be able to do it.”

Sen. Jon Tester (D-Mont.), another centrist, this week warned that lawmakers need to be careful about raising taxes when the real unemployment rate is estimated to be as high as 10 percent.

“I think there are some loopholes in the code that could be cut out. I don’t know that you want to do it right now,” he said.

Other Democrats are holding back from saying whether it would be a good idea to raise taxes while the economy is struggling, not wanting to get out in front of Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Charles Schumer (D-N.Y.). In late 2017, Pelosi dubbed the Trump tax measure “the worst bill in the history” of Congress.

Newly elected Sen. John Hickenlooper (D-Colo.) said, “The Finance Committee is going to have to wrestle with that and certainly the one thing I’ve learned is that I probably don’t want to wade into that. They’re looking at all the numbers and the arguments.”

Senate Finance Committee Chairman Ron Wyden (D-Ore.) has been working on a tax reform package and said it’s up to Schumer to decide when it will be put on the agenda.

“We’ve been working on these issues for quite some time,” he said Wednesday. “The majority leader will make the decision specifically on what comes next, but he and the president know that I have tax proposals that we’re fine-tuning and honing in the Senate that are very much in sync with what the president has been talking about.”

“My approach to legislating is to not front-run my colleagues,” he said. “I think the broad kind of framework has been pretty clear. I think we have two tax systems in America. I want one that gives everybody a chance to get ahead.”

Wyden said his staff has reviewed an analysis showing that the cost of a new round of direct stimulus payments could be easily covered by the amount that billionaires have seen their personal wealth increase since the start of the pandemic. He declined to discuss specifics though noted that he and Biden share an interest in addressing the threshold at which inherited estates are exempt from taxation as well as the capital gains rate.

Several House centrists are leery about raising taxes this year, even though they haven’t yet raised any public opposition to Biden’s pledge to repeal the Trump tax cuts.

Trump’s Tax Cuts and Jobs Act cut personal income tax rates across the board, doubled the child tax credit, almost doubled the standard deduction and reduced the top corporate income tax rate from 35 percent to 21 percent.

“I think we should not be raising taxes,” said one Democratic House member who requested anonymity because the lawmaker was not ready to reveal a public position. “People would accept the corporate tax raised a few points but beyond that you’re going to have problems, especially in the middle of an economic crisis.”

House Ways and Means Committee Chairman Richard Neal (D-Mass.), who has primary jurisdiction over tax policy, said he’s “open” to conversations about moving a major tax package at some point this Congress.

But Neal expressed concern that attaching tax increases to the infrastructure bill that Democratic leaders plan to move could send Republicans and Democrats into “their corners.” He noted his committee purposely did not include revenue raisers in the Green Act, a renewable energy bill, which Democrats reintroduced this month, to avoid a bitter fight over funding it.

Neal said he is also sympathetic to reservations voiced by centrists about raising taxes in the midst of a weak economy.

“You’ve got to be careful about it, obviously. [Treasury Secretary] Janet Yellen has said that you can’t raise taxes in a recession. You need sounder footing,” he said.

“We got to get the economy back on its feet,” he added, noting the pandemic has cost 10 million jobs across the country.

Rep. Abigail Spanberger (D-Va.), a member of the bipartisan House Problem Solvers Caucus, said her priority is funding broadband internet connectivity in rural communities such as those she represents in Virginia’s 7th District. Trump won her district in 2016 while Biden narrowly captured it in 2020.

She said the question about whether to raise taxes to offset the cost of a major infrastructure package “hasn’t been a topic of conversation yet.”

“At this point in terms of the reality of the things that we’ve been talking about it’s really focused on still the here-and-now of contending with the ongoing crisis,” Spanberger said, referring to the pandemic.

Rep. Bill Pascrell (D-N.J.), a member of the Ways and Means Committee, said there aren’t any plans to move on a tax package anytime soon.

“We’ve come through the pandemic. This is a tough time to raise taxes,” he acknowledged.

He argued that tax reform has to be taken up at some point in the future.

“Our tax system is a freakin’ disaster. [The system’s] fairness is even questioned,” he said. “If you ask me, ‘What would you want to do first thing?’ I would say tax reform. And that should be going on regardless of what else we’re doing,”

But he said the issue is on the back burner for now.   

“That’s the feeling I have,” he said.