Senate Majority Leader Chuck Schumer (D-New York) announced this morning that the Senate, House and White House have reached a deal on a framework to pay for the massive $3.5 trillion infrastructure spending package they hope to pass this fall under budget reconciliation. The deal does not include a top-line revenue number or a top-line spending number but rather is an understanding between Senate Finance Committee Chairman Ron Wyden (D-Oregon) and House Ways and Means Committee Chairman Richard Neal (D-Massachusetts) about what revenue-raising proposals may be on the table for the upcoming negotiations. Wyden and Neal will use the House Ways and Means Committee’s tax proposal combined with a few Senate pieces that were left out of Neal’s bill, which his committee passed last week. Some of the biggest differences include: Neal did not include a proposal to increase tax revenue from capital gains by eliminating stepped-up basis when calculating the tax obligations on inherited assets as well as a two-percent excise tax on stock buybacks and ending the 1031 “like-kind exchange” tax break for real estate investors. The proposed Senate language on ending the carried interest loophole, which allows investment fund managers to be taxed at capital gains rates instead of income tax rates, is stronger than in the House’s proposal and Neal also left out a Biden-backed proposal to require financial institutions to provide more information to the IRS about bank accounts. The deal includes a top income tax rate of 39.6 percent, a crackdown on tax-preferred conservation easements, often used by the wealthy to lower taxation on historical properties; and closing a loophole, that can shield huge investment gains from taxation within an individual retirement account.
The announcement came on a day when President Joe Biden and the White House were expected to continue meetings focused on advancing both a $1 trillion bipartisan infrastructure bill and a broader $3.5 trillion domestic policy plan that most Democrats now concede will have to be scaled back to win passage. House and Senate Democratic Leadership hope to coalesce around a compromise on the social safety net bill by Monday, when a vote is planned on the infrastructure measure. But agreement on a total cost, which programs to include and which to jettison, and how to pay for it will involve painful choices for a divided caucus. Speaker Pelosi and Leader Schumer did not say whether the spate of financing ideas will allow them to move forward next week with either the $3.5 trillion social spending package or the bipartisan infrastructure plan, Even with next week’s vote looming, Democrats’ path forward is still murky at best, with moderates and progressives locked in a public standoff over Biden’s two spending priorities.
Speaker Pelosi said today Democrats will avert a government shutdown by passing a stopgap spending bill without a debt ceiling increase in it, amid Republican opposition to linking the two measures. “Whatever it is, we will have a CR that passes both houses by September 30th,” Speaker Pelosi said at a press briefing Thursday. The House passed a stopgap spending measure this week that would keep the government open until December 3rd and suspend the debt ceiling until December 16, 2022. Republicans, however, are expected block it in the 50-50 Senate, where 60 votes would be needed to move it ahead. It’s not yet clear when the U.S. Treasury could be on the brink of a default, adding uncertainty to how quickly Congress needs to act. Treasury Secretary Janet Yellen has said the government will probably exhaust its ability to avoid breaching the limit at some point in October. Democrats likely will have to use the so-called budget reconciliation procedure to raise the debt limit but Senate Democrats have so far resisted employing that tactic, saying that the effort should be bipartisan — as it has been in the past.
For today, the Senate will resume work on the nomination of Florence Y. Pan, of the District of Columbia, to be United States District Judge for the District of Columbia as well as five State Department nominations.