Now the President is apparently preparing to negotiate with a bipartisan group to salvage a deal. Can he? I have my doubts, given the significant divisions that exist in his own party.
The fact is that West Virginia Sen. Joe Manchin gets most of the attention for demanding bipartisanship in this deal (and for opposing an earlier plan to raise the corporate tax rate from 21% to 28%), but other non-Manchin fires are flaring within party ranks.
First, farm-state Democrats like Rep. David Scott of Georgia and Sen. Jon Tester of Montana have no interest in financing and infrastructure plan on the backs of family farmers. According to Roll Call, Scott “objected Wednesday to President Joe Biden’s proposal to change the capital gains taxation on inherited property, signaling growing opposition among farm-state Democrats to a change Biden hoped would help to fund sweeping domestic spending proposals.”
Then there’s Biden’s proposal to raise capital gains taxes, which doesn’t sit well with Democratic senators Bob Menendez and Mark Warner, among others. Per Politico, the small list of Democratic lawmakers who’ve expressed concern is growing — and it’s not just those who face electoral challengers, “it’s also committee chairs and senior lawmakers in no real electoral danger.”
“This issue is so critical to our state and our constituents that we will reserve the right to oppose any tax legislation that does not include a full repeal of the SALT limitation,” wrote 13 House Democrats in a letter to the President in April, expressing a position that would present a serious vote-counting problem for Biden in the closely-divided House of Representatives.
Biden opposes full repeal of the State and Local Tax (SALT) limitation, which caps at $10,000 the state and local income and real estate taxes that can be deducted on federal tax returns. It passed as part of the 2017 Trump tax cuts. Wealthy folks around places like New York City and San Francisco, where local taxes are high, were hardest hit by the loss of the SALT deduction, and now their liberal congressmen are trying to fix it.
And progressives are upset with Biden for wasting time talking to Republicans at all. Last week, the House Progressive Caucus tweeted: “The pursuit of Republican votes cannot come at the expense of necessary, urgent, and popular investments. For a just, equitable package that meets this moment, both physical and social infrastructure are essential. Progressives will not be forced to choose between them.”
Republicans are relatively unified in their position: no tax increases, a much smaller price tag than Biden’s original proposal, and only spend already-appropriated money instead of borrowing or printing billions more, which the GOP believes will add to a growing inflation problem).
But the Democratic disunity is arguably plaguing Biden more, and it’s the real reason he should have taken Republican offers instead of rejecting them.
Negotiating with the Republicans was an attempt by Biden to live up to his campaign promise of bipartisanship; failing to reach a deal with them will show him to be good at posturing instead of actual deal-making.
Still, Biden has created a defensible argument, which would go like this: I came way down on the price and let go of the tax increases, and the Republicans still wouldn’t budge. Biden will now cast himself as reasonable and argue that Republicans would rather have nothing than allow a Democratic president to govern this country.
Notably, Biden has put the Republicans in a tough spot on taxes, as the President’s original position on raising corporate rates (and proposing a minimum of 15%, an idea he suggested last week) will prove far more popular than the idea of imposing user fees, preferred by more than a few Republicans, and some Democrats, including Warner, Tom Carper (D-DE) or Kyrsten Sinema (D-AZ) (think higher gas taxes and per-mile fees on electric cars.)
For the Republicans, they will argue that Capito was operating in good faith but that Biden just can’t shake loose of his progressive masters. The GOP will tell the American people that Biden is all talk with no intent to act when it comes to restoring comity to Washington.
It’s too bad. There was more value for both parties in striking a deal than in winning yet another Washington blame game over why nothing is happening. Biden should have taken the last GOP offer and run with it — nearly $1 trillion, most of it paid for by repurposing unspent Covid relief funds, and limited largely to roads, bridges, highways, airports and seaports. The progressives don’t like it, but there’s nowhere else for them to go.
For Biden, a truly bipartisan deal would have meant becoming the moderate dealmaker his campaign promised he would be. And for the Republicans, a deal on their terms would have meant crowing about preserving Trump’s tax cut legacy, guarding against inflation and eliminating the progressive laundry list from the final infrastructure bill.
Instead, we will be treated to another round of finger-pointing. Biden is betting the media will bail him out, extolling his virtues while slandering the faithless Republicans.
But the real lesson here is that this President is no better at making deals– despite his rhetoric — than the last one.