Democrats on the powerful tax-writing House Ways and Means Committee on Wednesday joined the faltering attempts across Washington to finding bipartisan agreement on elements of President Biden's sweeping $2 trillion infrastructure and stimulus plan.
But Democrats' plans to pay for that package — through a combination of tax increases for the richest Americans and a rise in the corporate taxes — has run squarely into Republican inflexibility on any rollback of the Trump tax cuts.
Committee Chairman Richard Neal, D-Mass., opened the hearing on leveraging the tax code for infrastructure investment without mentioning Democrats' plan to pay for those investments by rolling back major portions of the 2017 tax cuts.
"Now is the time to move landmark legislation that scales to the magnitude of our nation's challenges," Neal said. "I'm hopeful that today's conversation will help lead us to bipartisan areas of agreement."
A deep divide
One by one, Democrats talked about tax incentives and ways to boost private investment and, one by one, Republicans returned to Democrats' plans to increase taxes on corporations and the wealthy.
"As bad as the wasteful spending is, worse yet, it's poisoned with crippling tax increases that sabotage America's jobs recovery," said Rep. Kevin Brady, R-Texas, the top Republican on the committee. "Even assuming the best long-term economic gains from infrastructure, America is a net loser with tax increases that slow hiring, hurt paychecks and take America backward to the bad old economic days of President Obama and Vice President Biden."
Democrats have spent the past four years promising voters that they would take the first possible opportunity to roll back tax cuts on the wealthy and big corporations. They promised that doing so would bring in much needed federal revenue--but often lacked a cohesive plan for how that money should be spent.
Biden's pair of proposals, the American Families plan and the American Jobs Plan, answered the spending question. The two policy packages combine long-standing party priorities, like addressing climate change, child care access and affordable housing, under the umbrella of infrastructure.
Infrastructure investment, in concept, is a bipartisan goal. Paying for it is a different story. Ways and Means Committee member Lloyd Doggett, D-Texas, was among the few Democrats in the hearing who addressed the huge cost straight on.
"Most of our Republican Congressional colleagues professed great concern for strengthening our infrastructure but they weren't very interested in paying for any of that improvement," he said. "I think those who think freeways are free are ignoring the reality of the need to finance the infrastructure that America needs to be more competitive."
Truly bipartisan funding ideas do exist. Democrats and Republican generally agree on things like expanding some local development tax credits for distressed communities and incentives to encourage more private investment in infrastructure projects.
But Biden's plans would pay for the bulk of his proposals by increasing the top corporate tax rate from 21 percent to 28 percent and returning the top individual tax rate to 39.6 percent for taxpayers earning more than $400,000 per year.
Republicans are already vowing to do everything they can to stop it.
"The old broken, complex tax code that Joe Biden wants to take us back to was almost anti-American," Brady told reporters Tuesday after holding a "tax camp" for Republicans. "It slowed growth in America, it destroyed jobs, it kept paychecks flat for more than a decade."
"We are going to fight these tax increases tooth and nail," Brady said.
House Republicans met privately on Tuesday to rally their members in support of the Trump tax cuts. Minority Whip Steve Scalise, R-La., noted some 80 Republicans were not serving in Congress when the cuts became law.
"The Joe Biden tax plan is a tax plan that only China and Bernie Sanders would love," said freshman Rep. Byron Donalds, R-Fla., after the briefing.
A political gift
Although a small handful of Republicans have supported rolling back at least one provision of the Trump tax cuts--a cap on deducting state and local taxes at $10,000 that has hit taxpayers hard in states like California and New York--overall, top Republicans say they have little doubt the party will remain unified against any Democratic effort to pay for Biden's priorities by raising taxes on the wealthy, their investments, and corporations.
Republicans also see potential tax increases as a political gift ahead of the 2022 midterms where Democrats are on defense to protect razor-thin majorities against historic headwinds that favor the GOP to gain seats. In response to the Ways and Means hearing, a new activist group, the Coalition to Protect American Workers, fronted by Trump alumni, is launching the beginning of a political ad campaign starting next week that will run through 2021 and target as many as 20 House and six Senate Democrats.
"I think the Biden administration is obviously smart to to say it's only going to be a tax on corporations and the wealthiest of Americans," said former Trump administration official Marc Short, "I think our posture is their tax plan is going to be much broader than that."
Democrats also support provisions like raising gas taxes and reinstating tax penalties for the individual mandate to buy healthcare under the Affordable Care Act, which Republicans zeroed out.
"As the plan gets bigger there's going to be more pieces that impact a lot more people," Short said.
GOP pollster Tony Fabrizio recently tested varying messages in targeted districts including Rep. Josh Gottheimer, D-N.J., and Rep. Carolyn Bourdeaux, D-Ga. He said potent anti-Biden messages included the president's focus on electric cars, which could boost Chinese battery producers, higher capital gains taxes that could hit farmers, and Biden's plan to spend $80 billion to bolster the Internal Revenue Service so it can improve its enforcement and tax-collection efforts.
"When you think about it, from a political standpoint, it's probably the most hated federal agency and we're going to give it more money so it can hire more people so it can bother more people; that like violates politics 101 rules," Fabrizio said.
Short said the group's initial ad buy will being airing Monday in Bourdeaux's district and Pennsylvania Rep. Conor Lamb's district.
But Bordeaux's spokesman responded: "Republicans are getting ready to defend one of the most unpopular pieces of legislation in decades. Because of their tax bill, last year, 50 of the top corporations in our country paid zero in tax dollars. Now, we are getting ready to invest in infrastructure and workforce development, which will significantly benefit these same corporations. Even a five-year old understands that everyone should pay their fair share."
There is at least one ongoing effort to cut a bipartisan infrastructure deal that would leave Trump's taxes off the negotiating table. Senate Minority Leader Mitch McConnell, R-Ky., has already declared raising taxes a "red line" for Senate Republicans, which he personally informed Biden of at a recent White House meeting.
A group of Republican senators led by Sen. Shelley Moore Capito, R-W.Va., is in ongoing talks with administration officials to see if they can reach a deal on an infrastructure bill, but at a fraction of the $2 trillion cost Biden has proposed. She told Bloomberg TV that the next two weeks will be "the critical time spot" for any potential deal.