How Will the U.S. Pay for the $3.5 Trillion? Taxes, Mostly.
By Janet H. Cho
Now that the Senate has passed the $1 trillion infrastructure bill, the upper chamber now turns its attention to the second half of President Joe Biden’s economic agenda: a 10-year, $3.5 trillion budget resolution to invest in what the president calls “human infrastructure.”
How to pay for all this new spending will be the focus of debate in the coming months.
The budget resolution aims to fight poverty and inequity, invest in programs for children and seniors, and fight climate change—paid for by the largest corporations, the wealthiest Americans, and other revenue sources.
It proposes investing in universal prekindergarten and child-care programs, extending the child tax credits, providing two free years of community college, creating paid family and medical leave, expanding Medicare benefits to cover dental, hearing, and vision, lowering the Medicare-eligibility age, offering green-energy tax incentives, starting a Civilian Climate Corps, and buying more low-emission government vehicles.
Introduced on Monday, the Senate voted Tuesday on the outlines of the $3.5 trillion package, with details to be filled in over the coming weeks and months.
The Senate is set to leave for its August recess after the vote and resume debate on the broader initiatives when it returns to Washington in mid-September.
Senate Budget Committee Chairman Bernie Sanders (I., Vt.) called it a long-overdue investment in the working class, and “the most consequential piece of legislation for working people, the elderly, the children, the sick and the poor since FDR and the New Deal of the 1930s.”
Republicans who had supported the $1 trillion bipartisan infrastructure bill were critical of the partisan $3.5 trillion proposal.
“They’ve set out trying to tax and spend our country into oblivion,” Senate Minority Leader Mitch McConnell, (R., Ky.) said. Sen. Cynthia Lummis (R., Wyo.) called it “a progressive grab bag of policies that you’ll pay for with your hard-earned dollars either through more inflation now or higher taxes later.”
Democrats say they will pay for the second phase of Biden’s infrastructure plan with taxes on the wealthy and corporations, uncollected taxes, and other measures.
Senate Finance Committee Chairman Ron Wyden (D., Ore.) said they will offer lawmakers a menu of options including proposals for “multi-national corporations, the wealthiest individuals, enforcement against wealthy tax cheats, and savings from other programs.”
Democrats have proposed increasing tax rates on corporations to 28% from the current 21%.
The rate had been 35% before Republicans cut it in 2017.
Senate Republicans had refused to consider restoring tax increases during negotiations over the first part of the infrastructure package, a $1 trillion bill that passed Tuesday.
Democrats have also called for raising the top tax bracket for the wealthiest individuals to 39.6%, the level it had been before the Republican tax cut.
In addition, Biden has proposed raising the capital-gains tax rate to 39.6% from the current 20%.
Increasing the capital-gains tax could raise $370 billion over 10 years, the nonpartisan Urban-Brookings Tax Policy Center has estimated.
Biden and Democrats also want to expand the Internal Revenue Service’s capacity to pursue tax cheats.
One IRS watchdog group has estimated that wealthy tax dodgers owe more than $2.4 billion in unpaid taxes.
That, too, was cut from the infrastructure bill after some Republicans objected.
Democrats have asked the Senate Finance Committee to find additional revenue from healthcare savings, and a new fee on carbon and methane polluters, including taxing on imports from countries with weak climate change policies.
In addition, Sen. Elizabeth Warren (D., Mass.) and Sen. Angus King (I., Maine) have proposed taxing corporations 7% on profits reported to investors of more than $100 million, which they estimate would raise $700 billion over 10 years from an estimated 1,300 companies.
While Biden and other Senate leaders agree on the proposals, it is not certain that all 50 Democrat-leaning senators support what is now in the mix.
In the coming weeks and months, expect to hear different takes on what the best and final plan should be.
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