Top Biden administration officials are now weighing a range of different ideas to finance a sweeping economic and climate package as opposition from Democratic Sen. Kyrsten Sinema has thrown initial plans to raise the corporate tax rate into doubt, according to two people familiar with the matter.
The ideas were raised on a Wednesday call between top officials and the two chairs of the congressional tax writing committees – Senate Finance Chairman Ron Wyden and House Ways and Means Chairman Richard Neal, the people said. Treasury Secretary Janet Yellen and Brian Deese, the director of Biden’s National Economic Council, were among those who participated in the call from the administration, the people said.
While top administration officials regularly check in with key committee chairs, and Democrats have long had a range of tax options on the table to finance the overall proposal, the lack of the corporate rate’s inclusion in the discussion raised the possibility alternatives would be needed in its place.
Sinema wasn’t the focus of the call, but her opposition to an increase in corporate rates has been communicated to those involved the talks, a separate person familiar wit the negotiations said.
For Biden, raising the corporate and top individual tax rates were central components of his agenda – and widely supported by Democrats in both the House and Senate.
Yet the utilizing the corporate tax rate increase as a financing mechanism, which Biden proposed raising to 28% from the current level of 21% and Democrats weighed raising to 25% as a compromise, now appears in doubt.
The White House, asked Wednesday about the prospect the corporate tax rate hike could be stripped from a final bill, pointed to other provisions included in the plan that it says would address fairness within the tax system. But press secretary Jen Psaki said Biden still believes in raising the corporate rate from its current historically low level.
“He thinks that is not only fair but is long overdue,” Psaki said to reporters on board Air Force One. She added it was “clear where he stands” on the issue.
The sources noted that things remain fluid and it’s unclear where the actual process will land as negotiations continue. But the discussions underscored a concern that other options needed to be considered and ready to include, as well as the very real revenue hole that losing key elements of Biden’s proposal would create.
Among the potential alternatives raised on the call was a focus on a tax on companies issuing stock buybacks, revisions of international tax provisions and potentially setting a minimum tax on international corporations. Other options related to taxing the wealthiest Americans, including a formulation of a tax on the assets of billionaires, were also discussed.
Psaki told reporters “there are a range of components on tax fairness that are in the package, including the global minimum tax, something that we have led the world on.”
She said there were “other components in the tax fairness elements that the President is excited about” that stop short of raising the corporate rate.
Senate Democrats are now scrambling to find new mechanisms to pay for the legislation that doesn’t include increases in the corporate rate, as well as weighing whether there is a way to finance the proposal without increases to the individual rate.
It’s still not clear if Sinema’s position is her final one. The Arizona Democrat, as well as West Virginia Democratic Sen. Joe Manchin, have made it clear they would like this proposal to be fully paid for. If Democrats can’t get there without raising the corporate tax rate or individual rate, that could ratchet up pressure on Sinema.
Sinema remains opposed to tax increases on corporations and high earners, according to a source familiar with the matter, but one source said that Sinema could be pressured to change her position as the party scrambles to finalize a deal.
Neal said that Democrats have to figure out which programs to drop to make sure the package can be fully funded if she doesn’t change her view.
“Ironically, every Democrat in the House and Senate voted against the Trump tax cuts – this is a chance to address it. So if you were against it, this is a chance to repeal it,” Neal told CNN.
He said he intended to have a “cordial” talk with her.
Asked how to finance the package without raising taxes, he said: “We have to determine what the appetite is for what members really want – and how to pay for it…. One of the most difficult issues we have seen is we still have never a topline number from the Senate. What’s the number?”