Two steps forward one step back. Democratic leaders continued to work toward a truce between the party’s liberals and moderates. Reportedly, the now-roughly $1.9 trillion bill still would include paid family and medical leave, new Medicare dental, vision, and hearing benefits, alternative energy tax breaks, and a one-year extension of the expanded Child Tax Credit (CTC). Reportedly out: free community college for two years and a $150 billion clean electricity incentive program for utilities. Talks continue.
Then there are those taxes. Just when Democrats thought they were closing the deal on spending, they started fighting publicly about taxes. Arizona Senate Democrat Kyrsten Sinema reportedly threw cold water on key elements of Biden’s tax agenda, including hikes in the corporate and individual income tax rates. Democrats now are mulling alternatives including, oddly, a wealth tax to which she has not (yet) objected. To complicate matters a bit more, Ways & Means Chairman Richard Neal says he’s not prepared to move off the tax bill his panel approved last month. And a band of blue state Democrats still wants a fix to the state and local tax (SALT) deduction cap.
Could Congress put Treasury in charge of the debt limit? Pennsylvania Democratic Rep. Brendan Boyle introduced a two-sentence bill to let Treasury raise the debt limit on its own. Democrats say the bill is similar to one proposed by Senate GOP Leader Mitch McConnell in 2011. The so-called “McConnell Rule,” according to Speaker Nancy Pelosi, “has merit.” House Majority Leader Steny Hoyer says that Boyle’s bill offers a “viable” path to a debt limit deal.
How exactly would a parent receive Manchin’s Child Tax Credit? TPC’s Howard Gleckman has a lot of questions for Sen. Joe Manchin, who reportedly wants any extension of the CTC to include a “firm” work requirement and be limited to parents with “family income” of about $60,000 or less. Among them, what does work, and income, mean? What part of the CTC would phase out, exactly: the Tax Cuts and Jobs Act $2,000 CTC or the American Rescue Plan’s $3,000 credit? And if the ARP version is phased out, would that violate Biden’s promise to not a raise taxes on families earning less than $400,000 a year?
A tax might look regressive—but is it? TPC’s Gene Steuerle explains how specific tax proposals might appear to be regressive but when considered in the context of all tax and spending programs might still distribute income from those with more to those with less. Gene concludes: “Measuring progressivity one program at a time often misrepresents its full impact. It can lead to a variety of inefficiencies, as well as injustices among those who should be treated equally. Looking across multiple tax and spending programs almost always offers a superior way both to examine and design policy.”
Michigan’s House and Senate each advance scholarship tax credits. The bills would offer tax credits to residents who contribute to scholarship programs for students, including those in private schools. The Michigan Constitution bans spending public money directly or indirectly on private schools, so critics liken the efforts to unconstitutional voucher programs. Supporters say the tax credits are essential after a year of pandemic-caused remote learning. Democratic Gov. Gretchen Whitmer is likely to oppose the efforts.
For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky at firstname.lastname@example.org.