Senator Joe Manchin and Majority Leader Chuck Schumer have struck a deal on a tax, energy and climate bill, breaking a deadlock on the Democrats’ long-sought legislation to enact major parts of President Joe Biden’s agenda.
The plan, announced by the two Democrats on Wednesday evening, would generate an estimated $739 billion in revenue, spend $433 billion and reduce deficits by $300 billion over a decade. That’s still much smaller than the Biden administration’s plans before encountering Manchin’s repeated opposition.
Revenue would come from a 15% corporate minimum tax, allowing Medicare to negotiate drug-price cuts, and from boosting tax enforcement by increasing the Internal Revenue Service budget. The package would raise $14 billion from taxing carried interest, or profits made by some investment managers, at a higher rate.
The surprise agreement hit just hours after the Federal Reserve announced another 75 basis-point hike in interest rates, furthering its campaign to rein in the fastest inflation in four decades. Schumer and Manchin billed their plan as aimed at stabilizing prices, though economists have said smaller-scale fiscal measures are unlikely to have much impact.
The two lawmakers said in a joint statement that the Senate would vote on the legislation next week.
The package is a substantial reduction from the $3.5 trillion Build Back Better agenda that congressional Democrats discussed a year ago, which was whittled down to a House-passed $2.2 trillion bill.
Still, just weeks ago plans to salvage some parts of Biden’s agenda were at a standstill. The current deal represents a partial reversal of Manchin’s position earlier this month, when he told Schumer he couldn’t support a package of climate change measures and tax increases because of rising consumer prices after inflation hit 9.1% and wanted to wait until September to act.
It also is a major strategic win for Schumer. It was announced just hours after the Senate passed a $52 billion semiconductor industry subsidy bill on a bipartisan basis. Senate Republican leader Mitch McConnell had threatened to block that legislation if Democrats went through with their partisan tax and climate package. He relented after Manchin balked because of his inflation concerns.
The agreement came about after Manchin approached Schumer on July 18 to restart their negotiations, which continued until the deal struck on Wednesday, according to a person familiar with the matter.
“Democrats have already crushed American families with historic inflation. Now they want to pile on giant tax hikes that will hammer workers and kill many thousands of American jobs,” Senate GOP leader Mitch McConnell tweeted. “First they killed your family’s budget. Now they want to kill your job too.”