The White House, fresh off President Biden’s $1.9 trillion coronavirus relief package, is eyeing tax increases to pay for the next round of major spending on infrastructure and climate change.
The White House said Monday that higher taxes are definitely on the table and Mr. Biden is focused on making the wealthy and corporations pay more.
“His priority and focus has always been on people paying their fair share and also focusing on corporations that may not be paying their fair share, either,” White House press secretary Jen Psaki said. “So that remains his overarching approach, but there isn’t a package yet where we’re talking about pay-fors yet.”
Congressional Democrats who are cooking up tax increases could force a package through the House and Senate with party-line votes the same way they muscled through the $1.9 trillion American Rescue Plan.
Mr. Biden pledged on the campaign trail that his proposals wouldn’t increase taxes for people earning less than $400,000 per year. That is still his position, though the White House is not publicly endorsing specific proposals from congressional Democrats.
Mr. Biden campaigned on increasing the corporate tax rate from 21% to 28%, raising the top individual tax rate from 37% to 39.6% and increasing capital gains taxes on people who earn more than $1 million per year.
Transportation Secretary Pete Buttigieg said the need for an infrastructure package is urgent.
“We’re not waiting until September in order to act,” said Mr. Buttigieg, who visited a UPS facility in Maryland on Monday. “I’ll let the president lead on the legislative priorities and sequencing, but these conversations are very much alive.”
Treasury Secretary Janet Yellen said Mr. Biden could have to pursue tax increases to tame federal deficits, which are worsening from the nearly $6 trillion in coronavirus-related spending Congress has authorized over the past year.
The president “has proposed that corporations and wealthy individuals should pay more in order to meet the needs of the economy, the spending we need to do,” Ms. Yellen said on ABC’s “This Week.”
Ms. Yellen is working with Organization for Economic Co-operation and Development member countries on proposals including a “global minimum tax.” The effort is intended to stop companies from outsourcing and has the potential to generate some revenue for Mr. Biden’s spending plans.
During the 2020 campaign, Mr. Biden pushed for a minimum tax of 21% on all foreign earnings of U.S. companies overseas to try to head off a “race to the bottom” on worldwide corporate tax rates.
The White House has expressed optimism that infrastructure could be an area for bipartisanship, but it is unlikely to win over many Republicans if Democrats try to roll back parts of the 2017 tax cut to offset the spending.
That law cut the corporate tax rate from 35% to 21% and reduced individual tax rates across the board.
Sen. Susan Collins, Maine Republican, burst out laughing when asked how Senate Republicans would react to Mr. Biden’s tax proposals.
“I would not anticipate that it would be well received,” said Ms. Collins, who ran point for a group of Senate Republicans who were trying to strike a deal with Mr. Biden on the coronavirus relief package.
Sen. Josh Hawley, Missouri Republican, said he wants Democrats to forgo “fast track” procedures and go through the regular legislative process this time. He also said he is not on board with some of the tax proposals being floated.
“Carbon tax — I do not like the idea of it because that would be extremely harmful to Missouri consumers,” Mr. Hawley said.
Sen. Joe Manchin III, a West Virginia Democrat with outsize influence in a 50-50 Senate, has said he would like Mr. Biden to avoid the fast-track budget process and craft an infrastructure proposal that can win Republican support.
The White House declined to endorse a “wealth tax” proposed by Sen. Elizabeth Warren, Massachusetts Democrat, but Mr. Biden shares her desire to make the wealthy pay more, Ms. Psaki said.
“He had a different proposal he put forward than the one Sen. Warren has put forward,” she said. “But as is always the case with democracy in action, when it’s the appropriate time I’m sure they’ll discuss and he will discuss with others what their views are of how to address this moving forward.”
Ms. Warren has introduced a bill that would impose a 2% annual tax on households’ net worth of more than $50 million and an additional 1% tax on those with a net worth of above $1 billion.
Sen. Mark R. Warner of Virginia and other Democrats raised questions about how Ms. Warren’s plan would be implemented.
Ms. Warren’s proposal also would earmark about $100 billion for the IRS to step up enforcement.
Democrats for years have talked about closing the “tax gap” — the difference between taxes owed and taxes the federal government collects — as a way to reduce the ever-expanding federal debt.
The IRS could do a better job targeting higher-income individuals who are delinquent on their taxes, the Treasury Department’s tax inspector general said in a report.
The inspector general identified 685,555 taxpayers who reported income of $200,000 or more from 2013 to 2017 and collectively owed $38.5 billion in delinquent tax payments as of May 2019.
The IRS said in response that the agency does prioritize high-income taxpayers but uses factors other than income to determine whom to target for collections.
Brian Riedl, a senior fellow at the Manhattan Institute, said Democrats could pursue a two-track infrastructure proposal: one through the fast-track budget process and one through regular order, which would likely need support from at least 10 Senate Republicans to clear the 60-vote threshold to avoid a filibuster.
“Things like infrastructure are not as time-sensitive, or even health care if they want to throw that in,” Mr. Riedl said. “The only thing that would be time-sensitive is if they really find themselves in a logjam in September with things like expanding unemployment benefits and they decide to use [the budget] for that.”
The White House also is looking at taxes on “pass-through” corporations such as limited liability companies and increasing the reach of the estate tax on inheritances, according to a Bloomberg News report.
The 2017 tax law provided a new deduction for pass-through businesses and essentially doubled the estate tax exemption to more than $11 million.
Senate Republicans signaled this month that they wouldn’t go along with plans to increase taxes, and they recently introduced legislation to repeal the estate tax outright.
“Family-owned farms and ranches, like those in South Dakota, can bear the brunt of this tax, which oftentimes makes it difficult and costly to pass these businesses down to future generations,” said Senate Minority Whip John Thune, South Dakota Republican.