Democrats Propose Tax Increases for $3.5 Trillion Spending Package

Plus: A look at the markup process for this year's National Defense Authorization Act.

Your Uphill team is happy to be back after a small Labor Day-induced break. Now, to the news. 

Infrastructure Month Is Back

Democrats have figured out how they intend to pay for their massive infrastructure reconciliation package: lots and lots of new taxes. 

The plan, put together by House Ways and Means Committee Chairman Richard Neal, calls for increasing the tax rates of high-income individuals, income from capital gains, and corporations. Here’s a quick breakdown: 

  • The top individual tax rate would be raised from 37 percent to 39.6 percent.

  • The capital gains rate would be raised from 20 percent to 25 percent.

  • The corporate rate would be raised from a flat 21 percent to a graduated rate that would peak at 26.5 percent for businesses that bring in more than $5 million in income.

The plan also calls for an additional 3 percent surtax on individuals making more than $5 million annually, functionally creating a new highest tax bracket for the very rich. It also includes other provisions all aimed at increasing federal revenue, including cracking down on multinational companies stowing profits away in tax havens abroad, giving the Internal Revenue Service $78.9 billion to stiffen tax enforcement for Americans making more than $400,000 annually, proposing a new tax on carbon dioxide emissions, and increasing the tax rate for tobacco products and others that contain nicotine. The plan includes billions for education, immigration, health care, agriculture, and other sectors.

All in all, Democrats hope these measures will increase total federal revenue by $2.9 trillion over the next decade. However, in one memo floating around the Hill, that total is immediately followed with a big caveat—italicized, bolded, and underlined—saying, “This number remains very preliminary.” 

The Joint Committee on Taxation said Monday that they estimate a bump in capital-gains taxes would raise $123 billion over the next 10 years.

Congress is facing a slew of self-imposed deadlines in the next few weeks. Senate Majority Leader Chuck Schumer and House Speaker Nancy Pelosi want to see the completed reconciliation package by tomorrow, September 15. Plus, as we previously covered in Uphill, Speaker Pelosi agreed to vote on the bipartisan infrastructure plan in the House by September 27. The Senate has already passed the plan. 

The Ways and Means plan comes days after moderate Sen. Joe Manchin called for his Democratic colleagues to slow the process down. Manchin reiterated over the weekend that he does not support $3.5 trillion worth of new spending. 

Making the rounds on the Sunday shows, the West Virginia Democrat made it clear he thinks this is all too much, too fast. “I’m just saying that we should be looking at everything, and we’re not. And that we don't have the need to rush into this and get it done within one week because there’s some deadline we’re meeting, or someone’s going to fall through the cracks,” he told NBC’s Chuck Todd.

It isn’t that he isn’t in favor of the spending programs proposed, Manchin said. But rather than starting from a spending wishlist and then finding new revenue to pay for as much of it as they can, Manchin argued that lawmakers should move the other direction: Figuring out how much new revenue they could raise without hurting the economy, then setting that as a cap for the bill’s new spending as well.  

“I’m not going to go to a situation where I shoot myself in the foot and not be competitive globally,” he said. “I think that corporations should be paying. There shouldn’t be anyone escaping not paying their fair share. I think the IRS should be able to do its job, all those things. But when you do all that, Chuck, realistically and honestly, what does that spin off, without going into debt? And then look at that number it spins off, and find out what your greatest need is.” 

Whether or not Manchin supports the tax increases listed in Neal’s plan remains to be seen, but he said he remains a “hard no” on spending $3.5 trillion on the package. He’s not the only Democrat with such concerns: Sen. Kyrsten Sinema, an Arizona Democrat, said in July she did not “support a bill that costs $3.5 trillion.”

Manchin’s comments received immediate pushback from Senate Budget Committee Chairman Bernie Sanders, who called the West Virginian’s position “unacceptable” and said he would not be open to cutting the size of the package.

“I don't think it’s acceptable for the president, to the American people, with the overwhelming majority of the people in the Democratic caucus,” Sanders said on CNN Sunday.

It’s unclear whether Senate Democrats will jump on board with their House colleagues’ funding plan. In the evenly split Senate, Democratic leadership has no room for defections when it comes time to bring the reconciliation package to the floor.

Adding to the challenge is that lawmakers also must fund the government by the end of September and must raise the debt ceiling by the middle of October. Currently, Democrats have added a debt ceiling increase to the framework for their budget outline. However, Senate Republicans have sworn they will not vote for anything that contains a debt ceiling increase.

Questions Remain, Political Storms Brew Over Afghanistan 

With the Senate back in session this week and the House conducting committee work, some lawmakers seem determined to get answers on what went so wrong with the U.S. evacuation of Afghanistan and to equip the Defense Department with the necessary resources to prevent further loss of life in the region. Others saw the tragedy as an opportunity to shoot off some political fireworks. 

Every year, members of the House Armed Services Committee gear up for a late night to offer, debate, and vote on amendments to the National Defense Authorization Act, which in layman’s terms is the budget for the Defense Department every year. This process is called a “bill markup” and happens for bills in Congress. 

Most markups don’t get much fanfare, but so much is at stake in the markup of the NDAA there is usually a great deal of focus on it. This year, especially, with the botched withdrawal from Afghanistan, nearly 800 amendments were debated and voted on by the committee. Eventually, after many hours of debate, early in the morning on September 2 the bill was passed out of committee by a vote of 57-2. It will now advance to the House floor for a vote from the full chamber. 

One prominent amendment was offered by Rep. Liz Cheney of Wyoming, establishing a bipartisan commission to look at the full scope of the war in Afghanistan and what can be learned from the failures there. That amendment was passed by a simple voice vote, meaning it had large support among members of the committee regardless of party. 

The biggest debate on any of the amendments was over one offered to add nearly $25 billion to the defense budget for the fiscal year of 2022. Support from Democrats on the measure was no guarantee, especially given the White House’s initial defense budget which was less than what the committee eventually agreed to. That changed when Committee Vice Chair Rep. Elaine Luria announced her support for the measure. “This additional $23.9 billion, a 3 percent increase over the president’s budget, with significant investments for our public and private shipyards and our industrial base, means more jobs in Hampton Roads and security abroad,” said Luria, whose coastal Virginia district contains America’s largest naval base.

Progressives were opposed to this amendment, and in the end voted against it. “It’s remarkable to me that as we end our long and expensive campaign in Afghanistan, so many are concluding that what we need is more war, more weapons and billions of dollars more than even what the Pentagon is asking for,” said Rep. Sara Jacobs of California.

Ultimately, 14 Democrats joined Republicans to pass the amendment with a final vote of 42-17. 

Along with the serious amendments pertaining to national security being debated and voted on, plenty of Republicans tried to turn the bill into yet another culture war battle. Several Republicans used the markup to grandstand about critical race theory in the military. Reps. Jim Banks of Indiana, Mark Green of Tennessee, and Vicky Hartzler of Missouri introduced amendments that centered around CRT. All of them failed. 

Predictably, Democrats were visibly annoyed by Republicans using this particular bill markup to debate the controversial topic. “Instead of us talking about how we should be addressing the issues in Afghanistan, supporting our men and women who are serving our country right now around the world, making sure that we’re adequately providing the resources and the tools that we need, you all have decided to bring this issue into the debate in this committee on the National Defense Authorization Act. Why?” said Rep. Steven Horsford of Nevada.

A Republican staffer told The Dispatch having the CRT debate in the NDAA markup ends up hurting the party at the negotiating table. “It makes it tougher to work across the aisle, and we have to do things like that,” the staffer said. “It shows the Democrats and it shows the country, frankly, that the people that are proposing things like this are more interested in playing politics and stoking the cable news flames than actually legislating actually working on substance trying to get something done.”

The bitter partisanship seeped into moments of yesterday’s House Foreign Affairs Committee hearing with Secretary of State Antony Blinken. Members accused the Biden administration, and Blinken specifically, of manipulating intelligence that resulted in the catastrophic withdrawal. 

In one of the more incendiary exchanges of the day, Rep. Brian Mast of Florida, who lost both legs serving as an Army bomb disposal expert in Afghanistan, made the accusation while showing pictures of all of the servicemembers who died in a blast outside the Kabul airport. He then refused to let Blinken respond to his accusations. After being given the chance by the committee chairman, Rep. Gregory Meeks of New York, to respond to the allegations of manipulating intelligence, Blinken strongly denied them. 

As this newsletter hits your inbox, Blinken is currently testifying in front of the Senate Foreign Relations Committee. That livestream can be watched here

Presented Without Comment

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