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Democrats Squabbling on Economic Plan as Deadline Closes In

·5 min read

(Bloomberg) -- Senate Democrats have shown scant signs of progress on a tax and climate bill as they end their work week in Washington, leaving them at increased risk of blowing past an early August deadline to pass the legislation.

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The Senate has just three more weeks to meet Majority Leader Chuck Schumer’s self-imposed due date to pass a slimmed down version of President Joe Biden’s economic agenda. The lack of momentum also risks Democrats meeting their hard deadline of Sept. 30, when their authority to pass the bill on a party line vote expires.

Major portions of the bill -- most notably the energy measures and tax increases on the wealthy and corporations -- have yet to be made public. Those details have been kept closely guarded between Schumer and Senator Joe Manchin, who met virtually this week because Schumer had tested positive for the coronavirus.

Manchin, the West Virginia Democrat whose support is critical for the bill to advance in the 50-50 Senate, didn’t respond to a question about whether progress had been made this week. He just shook his head as he stepped into an elevator on his way to the Senate floor for the final vote of the week.

“We need to remind ourselves that eventually time will run out and let’s not waste this time,” said Senator Tom Carper, a Delaware Democrat.

The package of legislation was originally intended as a $3.5 trillion economic program with ambitious climate provisions, paid-for child care and other provisions that would have been the centerpiece of the Democratic Party’s campaign in the November congressional elections. But time and Manchin’s opposition have left Democrats haggling over what they can salvage.

While the Senate could complete votes on any bill quickly, it may take weeks of haggling with the Senate parliamentarian to get the legislation to comply with arcane budget rules before it can be brought to the floor.

Almost every agreement put forward so far has been subject to caveats. Schumer announced last week that there was a deal for an expansion of a 3.8% levy -- currently paid by top-earning individuals and estates -- to also apply to the distributions pass-through entities, including limited partnerships and LLCs, pay to their partners.

Manchin said he wants to make sure that provision is thoroughly “scrubbed.” Montana Senator Jon Tester said he wasn’t familiar with the proposal, and Arizona Senator Kyrsten Sinema, who has blocked some tax increases in the past, declined to comment on the measure.

All 50 Democrats must support the bill in order for it to pass, since Republicans are unified in opposition. GOP lawmakers took satisfaction in the lack of consensus among Democrats.

“I don’t know how they pull it together. There are too many moving parts to this,” South Dakota’s John Thune, the No. 2 Senate Republican, said Thursday. “It doesn’t look anywhere close to done based on conversations I’m having.”

EV Credits

Among the remaining sticking points is the fate of a tax credit that would provide generous consumer tax credits for the purchase of electric vehicles.

“It’s very difficult. That’s all I’m going to say,” Senator Debbie Stabenow, a Michigan Democrat, said as she got into an electric vehicle -- a Chevy Volt made in her home state -- while leaving the Capitol.

Opposition from Manchin already led Democrats to drop a domestic union bonus that would have bumped the $7,500 credit to as much as $12,500 per car. He also wants stricter limits on the income of those allowed to take advantage of the credit and on the cost of the vehicles. Proponents of the tax credit say those limits could effectively render it nearly ineffective.

“It’s too early to say we can’t get this done,” said Senator Gary Peters, another Michigan Democrat fighting for the credit and who had hoped for the energy and climate plan to be released on Thursday. “We still have time.”

Manchin has also sought to make the climate portion of the package more friendly to fossil fuels -- a move that would draw the ire of progressive Democrats and environmental groups -- while opposing a plan to give clean-energy developers direct payments by making tax credits refundable. He also wants to increase drilling in the western Gulf of Mexico, and increase credits that could benefit fossil fuels.

Also unresolved is whether the bill will include expanded Obamacare premium subsidies, which are set to expire in January. Notices of big increases in premiums would go to voters in October, a month before the midterm elections to decide control of Congress.

The other items under consideration are an excise tax on stock buybacks, a 15% global minimum tax, stricter tax rules for overseas profits of U.S. companies, a minimum levy on corporations financial statement profits, also known as a book tax, and additional Internal Revenue Service funding so the agency can crack down on tax avoidance.

In the House, moderates in swing districts have become more vocal in opposing tax increases before the election. A group of Northeast lawmakers have demanded any tax bill include a lifting of the cap on the state and local tax deduction, something that would benefit upper middle class voters in their districts. That SALT change has not even been broached by Manchin and Schumer, however.

Senate Finance Committee Ron Wyden, who is in charge of the tax portion of the bill that will fund the energy investments, said the lack of public releases this week doesn’t prevent them from passing the bill by August. He said progress continues to be made on key areas, including tax avoidance, prescription drug prices and clear energy, though declined to give specifics.

“Look, I still think we got a better than 50-50 chance of getting this done,” Senator Chris Van Hollen, a Maryland Democrat, said. “Exactly what the time frame is, I do not know.”

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