House Ways and Means Chairman Richard Neal said that the bill would have to “mollify” the demands of those two senators to make it through Congress. The eleventh-hour deal-making reflects the need for the caucus to stay united in face of concerted Republican opposition.
Democrats are also likely to abandon Biden’s ambitious proposal to expand inheritance levies, by removing a benefit that allows some assets to be passed to heirs tax-free, known as step-up in basis.
Scaling back presidential proposals is part of the typical legislative process in Washington. The executive branch proposes its grand vision, and then 535 members of Congress get to debate and revise that plan.
Yet Biden’s tax agenda has taken an unconventional path as lawmakers have picked some pieces and rejected others.
Some of the tax increases seen by many Democrats as politically the easiest -- reversing the Trump tax cuts on corporations and individuals, as well as eliminating the carried interest tax break for private equity -- are now candidates to get dropped. And some of the more complicated approaches -- like Biden’s plan for a corporate minimum levy on profits reported on financial accounts -- have the support of all 50 Senators.
White House Press Secretary Jen Psaki said at a briefing Wednesday that “the president certainly knows there’s some agreements and some disagreements about which components of a range of tax-fairness proposals are the best options. That’s why there are so many out there that he has proposed, that others have proposed, that what we’re doing now is working through what will be in the final package.”
Lisa Zarlenga, a former Treasury tax legislative counsel, still estimates that the Biden administration has managed to get quite a few of its proposals -- at least in part -- into the legislation being considered, when compared with previous presidents.
An expansion of the net investment income tax -- a capital gains surtax on high-earners -- is still in the mix, and Congress has kept most of Biden’s plans to overhaul the international tax system in tact, with some minor changes, she pointed out.
“It’s actually probably a pretty good percentage,” Zarlenga said.
But for many progressives, the tax increases weren’t just about finding dollars to fund new social spending, they were also about addressing wealth and income inequality. Besides the spending elements of the bill, the legislation was a chance to reshape the tax code to shift more of the burden on the wealthiest Americans -- who have many options to reduce or defer their tax bills.